It has recently emerged that lending via social media between private individuals, so-called quick loans, is increasingly taking place. This is especially after a cap on the interest that a lender can charge a debtor was introduced in 2019. More debtors now feel trapped and unaware of how much they owe or how to get out of debt.
However, having taken out a quick loan does not have to be a problem. The Danish Parliament took into account that this could happen when the new rules were introduced. The text of the agreement states, among other things:
The settlement of the payday loan market must not lead to this type of lending moving to the unregulated loan market. There is therefore agreement among the parties to the agreement that developments in the market for loans between individuals (peer to peer) must be followed closely, especially on social media. Lending between individuals in Denmark is covered by the provisions of the Contracts Act, including the provisions on unfair terms. Nevertheless, there are examples of loan agreements with very high costs. Therefore, the parties to the agreement agree that the ceiling above the APR of 35 percent and the cost ceiling of 100 percent must also apply to consumer loans without collateral between private individuals. If a private individual, in accordance with a documented loan agreement, demands interest and costs that exceed the APR ceiling or the cost ceiling, he or she must not be able to demand repayment of more than the amount borrowed. Source: Settlement text of 19/12/19
Consumer Loan Companies Act Section 11a says (emphasis in bold is mine):
A consumer loan company that has a permit as a consumer loan company pursuant to section 3(1) and that has entered into a credit agreement with a consumer in violation of subsection (1) may not charge higher costs than what corresponds to annual percentage costs of 35 percent. The first sentence also applies to financial undertakings pursuant to section 5(1)(1) of the Financial Business Act and to foreign financial undertakings that operate in this country through the establishment of branches or cross-border service activities.
Paragraph 4.
If subsection 3 results in a reduction in the outstanding debt, the consumer must pay this in accordance with the arrangement agreed with the consumer loan company, however, such that the reduction occurs in the payment or payments that fall due first.
Paragraph 5.
A consumer loan company that has entered into a credit agreement with a consumer in violation of subsection 1 must recalculate the credit agreement.
Paragraph 6.
A natural or legal person who is not a consumer credit company and who has entered into a credit agreement in violation of subsection 1 may only demand repayment of the total credit amount. The first sentence also applies to consumer loan companies that do not have a permit as a consumer loan company pursuant to section 3(1). The first sentence does not apply to financial companies pursuant to section 5(1)(1) of the Financial Business Act and to foreign financial companies that operate in this country through the establishment of branches or cross-border service activities.
Section 30 of the same Act states that a violation may result in a fine or up to 4 months in prison.
If you as a debtor experience having taken out a loan where the APR (Annual Percentage Rate) exceeds 35%, or where the total costs of the loan exceed 100%, then you as a debtor can sit back and know that the borrower is not entitled to interest or costs at all. The rule is that the debtor only has to pay back the principal (the amount originally borrowed), but does not have to pay either interest or other costs.
If you have questions about quick loans taken out after July 1, 2019, you are welcome to contact attorney (H) Søren Vasegaard Andreasen.
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