On February 12, 2019, the Ministry of Finance in Norway issued a new regulation that imposes requirements on the lending practice for consumer loans and credit cards on the Norwegian financial companies. The new regulation will curb the risk of increasing consumer debt in Norwegian households, ensuring that the financial companies will take into account the customer’s economical ability to take on a consumer loan.

Stricter requirements will be imposed on the customer, and some may find it more difficult to obtain loans and credit cards now than before.

Norway flag at sunrise

What Are the Requirements of the New Regulations?

In 2017, new guidelines from the Norwegian Government were given to Norwegian financial companies, with the intention of providing responsible lending practices for consumer loans. However, the Norwegian Ministry of Finance saw that these guidelines were not followed by all financial companies, and a new regulation was therefore necessary.

The regulations include requirements for:

  • Personal economy
  • Debt
  • Income
  • Installments

Banks must require a monthly downpayment on the consumer loan, and the amount must be large enough for the loan to be paid down within five years.

What is the purpose of the regulation?

There has been a large increase in Norwegians’ consumer debt in recent years, and young adults use credit cards to finance smaller purchases more now than before. This is considered by the Norwegian Government to be worrying. The Government says that the historically high household debt is one of the most important vulnerabilities in the Norwegian economy today. Consumer loans account for only 3 percent of the total household debt, but the growth has been twice as high just in the past few years.

When consumer debt comes on top of an already high mortgage loan, this can go beyond the consumer’s ability to serve their down payments, thus destroying a healthy economy. In addition, the Norwegian politician Siv Jensen wants a holistic regulation of the bank’s lending practices, both for consumer loans and mortgage loans, in order to ensure sustainable development of Norwegian household debt. The regulations are temporary and will apply until 31st of December, 2020.

Read more about the purpose of the new regulation on Regjeringen.no.

Norwegian Banks Can Get Information About Available Credit

From the summer of 2019, information of any Norwegian consumer’s debt will be available through debt information companies. This means that the bank will have access to information such as the number of credit cards and available credit. This information has not been available to the debt information companies before, as unused credit has not been counted as debt.

Credit cards with a credit limit of NOK 25,000 and below are exempt from parts of the requirements, as long as the consumer does not have several credit cards from before. The access to such information can have an impact on a Norwegian’s loan capacity, and the measure has been initiated to prevent Norwegians from taking on too many credit loans. As a result, the overall financial situation will affect loan applications to a greater extent.

The new financial regulation will have an impact on Norwegians’ loan applications. Financial institutions are no longer allowed to grant loans to customers who cannot tolerate an interest rate increase of 5 percent. This is calculated based on total debt and total annual income. Nor is it allowed to grant loans or credit cards to customers who have a total debt exceeding five times their annual income.

Final Advice for Norwegians

If you have plans to apply for a consumer loan, you can safely search through the brokerage service of Axo Finance. They cooperate with some of the leading banks and lenders in Scandinavia, who have already followed the guidelines of the Norwegian Financial Supervisory Authority from 2017.