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Kåre Lilleholt , University of Oslo

Kåre Lilleholt , University of Oslo. Consumer credit and responsible lending in Norway. Consumer loans. Loans taken by consumers, irrespective of purpose Mainly non-secured loans but mortgage loans for other purposes than acquisition of the property are common

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Kåre Lilleholt , University of Oslo

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  1. KåreLilleholt, University of Oslo Consumer credit and responsible lending in Norway

  2. Consumer loans • Loans taken by consumers, irrespective of purpose • Mainly non-secured loans • but mortgage loans for other purposes than acquisition of the property are common • Loans for extremely short periods and other consumer loans • Credit cards, overdraft facilities etc. • not dealt with here, but may serve the same purposes

  3. Legislation and supervision • EEA agreement and EU rules • free movement of capital and freedoms of establishment • requirement of license; supervision • credit institutions with Norwegian branches and subsidiaries • cross-border consumer credit? • Financial Contracts Act • Rules on unfair terms etc. • Marketing Act

  4. Loans for extremely short periods • Folkia AS (Monetti) • Credit period 30 days • NOK 1000–5000 (EUR 125–625) • APR up to 9245

  5. Other consumer loans • Example Bank Norwegian • Credit period one year or more • NOK 5000–400 000 (EUR 625–50 000) • Nominal interest rate 8,99–21,44 • Other banks • Intermediaries

  6. Financial Contracts Act • Also implementing Directive 2008/48 • Advertising • Pre-contractual information • Duty to explain • Duty to warn • Formal requirements

  7. Procedures, exemplified by Folkia AS • Advertising (dir. art. 4) • amount, period, credit costs (representative example) on the Internet • Pre-contractual information (dir. art. 5) • “in good time”, contract details, on paper or other durable medium; but exceptions for voice telephony communication • Assessment of creditworthiness (dir. art. 8) • credit information agencies • no credit database

  8. ctd. procedures • Explanations to the consumer (dir. art. 5(6)) • by phone? • Warning against taking up the loan • written and, if possible, verbally • written confirmation by consumer • breach may lead to adjustment of the consumer’s obligations

  9. ctd. procedures • Written agreement (dir. 10) • use of electronic medium is allowed • the contract must be available • secure method of authentication • current dispute with the Consumer Ombudsman • Returning customers • are offered “SMS loans” • overdraft facility? • current dispute with the Consumer Ombudsman

  10. Formation of Contracts Act • Contracts void for usury? • not applied in practice • General clause on unfair terms • mostly a question of sufficient information

  11. Marketing Act • Control of marketing • Control of terms in standard contracts • Both by the Consumer Ombudsman

  12. Responsible lending and over-indebtedness • No financial crisis – so far • employment numbers • bankruptcies • debt recovery • Requirements for owner’s capital • Capital requirements for banks • Housing bubble? • Duty to warn against credit seems to be of small practical relevance

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