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According to Finanstilsynet, the volume of consumer loans in default has increased significantly and is now at a high level.
“Non-performing consumer loans at the end of the first half of this year accounted for nearly half of the debt collection companies’ (original debt) defaulted principal for recovery,” the Authority wrote in a statement Monday.
The audit reports that the volume of consumer loans to Norwegian clients has dropped by 14 percent in one year.
– What we are seeing now is the effect of the interruption of access to new loans for those who have already received too much, says Endre Jo Reite, director of retail at BN Bank.
Reite explains that the stop we see is due to the debt registry that was introduced last year.
– Then a few months passed and then several of the vulnerable have exhausted all their credit facilities. We see the effect of a sharp slowdown before many indebted households collapse, Reite says.
Last year BN Bank decided to stop offering consumer loans to its clients, due to uncertainty and defaults.
Reite points out that there is a large group that has an insurmountable number of loans and has repaid these loans by borrowing more.
– They received a temporary relief in mortgage rates, some have also withdrawn credit cards to stay in a stable lateral position, but now we immediately begin to see the consequences of too many taking out too many loans before it is properly regulated, says Reite.
Exposed consequence
According to Reite, the Debt Register did not have an immediate effect, as many of the consumer borrowers have a home to turn to.
– The only thing that does not make this even worse is that those who have mortgages are the ones who more easily get consumer loans. Consumer banks have been focusing on homeowners, they can refinance through other banks or sell their homes, and these are the reasons why it has been some time before problems have surfaced and saved. consumer loan banks for significant losses, says Reite.
– What seemed a shame to me is that a large part of the default and the cost it entails affects consumers more.
Reite notes that consumers have relied on bank assessments of how much they can borrow, and that many now have to be rescued by family and friends or are forced to mortgage their homes to consumer loan banks.
– I think it has been a simple control by the banks, if you are in a difficult financial situation then it is very tempting to take out a loan. When we did consumer loans, we found that it was quite easy to control and select many who should not get loans. But as long as the banks gained more by not controlling, there were probably many who allowed themselves to do so, Reite says.
687,600 debt collection cases related to consumer debt
Adjusted for non-performing consumer loan sales by companies, the decline in consumer loans to Norwegian clients was 10.6 percent, according to the Finanstilsynet report.
The default rate was 13.4 per cent for the sampled companies, which is 2.4 percentage points higher than at the end of 2019. Norwegian consumer loan banks had a default rate of 19.6 per cent. , which is 3.8 percentage points more than at the beginning of the year.
There were 687,600 debt collection cases related to consumer debt at the end of the first half of 2020, according to the report.
Greater recovery in the age group 30 to 39 years
“Cases accounted for 11.3 percent of the total number of cases for collection at all debt collection agencies. The age group 30 to 39 years has the highest proportion of cases, with 27.6% “.
Finanstilsynet refers to figures from the Debt Registry, which collects information on unsecured loans and other types of loans to individuals in Norway, showing that the total volume of loans has decreased by NOK 13.8 billion from the beginning of the year to September 27.(Terms)Copyright Dagens Næringsliv AS and / or our suppliers. We would like you to share our cases via a link, which leads directly to our pages. Copying or other use of all or part of the content can only be done with written permission or as permitted by law. For more terms, see here.
