It can be difficult to figure out how expensive mobile loans are, or anticipate the consequences of such a loan. The loans may have hidden charges and interest rates of up to 4000% per annum, and nothing indicates that consumers will be helped by a ban, or interest ceiling, on these expensive loans.
It seems easy and quick to take out a loan
The requirements to be approved are almost non-existent and you do not have to talk to a stomach acid bank advisor. But mobile loans have unpredictable consequences.
Today, there are more and more young people who suddenly find themselves trapped in a deep debt spiral that is more of a common hard to get out of.
Should Mobile Loans Be Illegalized?
Back in 2009, there was debate over whether the so-called mobile loans should be made illegal, a proposal put forward by the then opposition that called for the industry to be regulated with a ceiling on interest rates.
This was rejected by the Minister of Finance and Business. Since then, the industry has experienced great growth and it is believed that today there are over 2,300 Danes who have ended up in RKI’s debt register as a result of having taken up the very expensive mobile loans.
However, the companies in the industry also resort to unethical methods in their marketing, and in some cases, they hide penalties or advertise with false interest and costs on their loans. Thus, there have been cases back home where companies have been given hefty fines for this kind of aggressive marketing.
Massive criticism of mobile loans
In Sweden, there have also been major problems with people who have been indebted and unable to pay. This has resulted in the government taking in and making laws that protect the consumer and have banned the industry from advertising, as it was believed that marketing was contrary to the law. In Germany, the expensive loans have been completely banned and a ceiling on how high the fees may be in connection with a loan.
However, the mobile loan industry has not flown completely under the radar at home. The industry has been heavily criticized by the Consumer Council, in particular, who believes that this type of loan leads to people’s over-indebtedness and is a major societal problem. Thus, the industry has repeatedly expressed a desire to regulate the industry and set a ceiling on the annual percentage rates (APR).
Two thirds will ban the expensive mobile loans, study shows
This critical view of mobile loans has apparently spread to the majority of the population. Metroxpress thus conducted a survey last year which showed that two-thirds of respondents would have banned the expensive loans. If that did not happen, four out of five thought that a ceiling on interest rates should be introduced, as you see it in Germany.
However, despite the massive criticism from the Consumer Council and growing skepticism among the population, it seems that regulation or legislative change that would prohibit the very expensive loan model has to wait. The current government has not made any changes to the market and it is doubtful whether they will do so before elections are made.