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Sweden announces SMS loan crackdown

AFP/The Local · 30 Oct 2009, 14:25

Published: 30 Oct 2009 14:25 GMT+01:00

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"We plan to present a bill in the spring of 2010 putting stricter conditions on access to credit, including SMS loans, by requiring proof of creditworthiness," a spokesman for the consumer affairs ministry, Yoav Bartal, told AFP.

The new lending system has enabled people usually barred from receiving loans, such as teenagers and other low- and no-income groups, to borrow cash without delay.

By sending or responding to an SMS, they can have quick cash deposited in their bank accounts.

Meanwhile the opposition Social Democrats adopted a resolution at their party convention on Friday going even further, calling for a total ban on SMS loans to children under the age of 18, including those who are solvent.

"I get messages and mails from parents almost every day to say that their children have gotten loans without really wanting them by just saying yes when they got an offer on their phones," party member Veronica Palm said, adding that the number of indebted youths has skyrocketed in Sweden since the introduction of SMS loans in 2006.

She cited other cases of youths who "asked for (a loan) during a Friday night party when they didn't really know what they were doing."

The loans, which on average amount to 3,000 kronor ($425), come with average fees of 500 kronor and interest payments of 50 kronor and must be repaid at a breakneck speed of just 30 days.

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The level of debt default over text message loans has soared since their introduction, with one-third belonging to people aged under 25, according to debt recovery officials.

SMS loans exist in the United States and several other European countries.

AFP/The Local (news@thelocal.se)

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Your comments about this article

18:57 October 30, 2009 by DamnImmigrant
When I first heard of these SMS loans, I thought it was some kind of joke!

NO! It turns out the joke is on the consumers.

Easy access to loans by just responding to an SMS!?!?

Why would the parents be responsible if a loan company approved a loan for an under aged person?

I expect this kind of nonsense in America - but not in Sweden.

Sorry but I think this nonsense should be outlawed!
22:32 October 30, 2009 by Nemesis
I have actually been in a pub when a 19 year old sms's a bank and suddenly had money in his account again, to buy more drink.

At first I found it hard to believe, but it is real.

Kronofogoen must have a field day with these people.

The entire sms loan facility needs to be banned. It is not progressive, it is the road to bankruptcy.
01:43 October 31, 2009 by SajidAli
I agree with you guys, this is not the proper way to give money. Specially teen ages don't think that how they will give back this money, they just want to enjoy and i think this can a serious problem for parents.

Please Stop this.
14:48 October 31, 2009 by MisplacedAmerican
What? We don't even have this in America!

What's gone wrong? Has the whole world suddenly become American?
08:50 November 1, 2009 by Nemesis
@ MisplacedAmerican

Sorry to tell you this. It was an american person who came up with idea. Another reason to nationalise Swedbank were he worked at the time.

In the early 90's in Sweden, it was possible to walk into a bank and get a personal loan of 200,000 krona without colatoral. Two kompisar of mine are still dealing with Kronofogen over that one, from the ecomonic crash in Sweden back then.

AIB in Ireland was seriously looking a the idea shortly before it was nationalised while attempting to turn Ireland into a 3rd world country again. The same American. Fortunately the Allied Irish Bank collapsed and was nationalised before it could implement such an idea in the credit drunk Irish society of the time.
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