JURIDICA INTERNATIONAL 22/2014
PhD, Associate Professor
The Way to Over-indebtedness—
Intensive Marketing, Easy
Access to Loans, and
Insufﬁ cient Legislation
Consumer credit is increasingly offered, for various purposes and in various ways. In particu-
lar, electronic Web and SMS loans have been growing considerably over the last few years,
and they attract attention owing to their high costs. The easy access to credit, in combination
with intensive marketing, contributes to increased private borrowing, thus creating a debtor
culture. The fact that easy access to credit is not only to the beneﬁ t of the consumer is reﬂ ected
in the main register for default on private debt in Denmark. Here more than one in 20 adult
Danes are registered with a bad credit history, and the defaulted debt has doubled in the last
six years. The focus of this article, therefore, is on the legal problems related to easy access
to non-secured consumer credit as illustrated by Danish legislation. It will be suggested that
the legislation is not functioning effectively and that more well-proportioned solutions are
needed. A modern approach should recognise that consumer credit differs from other con-
sumer arrangements, because consumers run a special risk of becoming over-indebted—not
only to their own detriment but ultimately also to that of society. One of the possible solutions
is to limit marketing and introduce responsible lending standards.
Consumer credit is increasingly offered, for various purposes and in various ways. In Denmark, Web-based
and Short Message Service (SMS) loans have been growing dramatically since 2007, and they particularly
illustrate the problems associated with lending and, especially, borrowing. The focus of this article will,
therefore, be on these loans. The facts outlined below accentuate the problems.
The marketing of consumer loans is intensive, and it does look tempting when it says this:
The Way to Over-indebtedness—Intensive Marketing, Easy Access to Loans, and Insufﬁ cient Legislation (Denmark)
72 JURIDICA INTERNATIONAL 22/2014
You can use the money for whatever you want—forget everything about reporting and follow-up
by your banking consultant! Recapture your freedom and control your own ﬁ nances—it is only
Generally, the marketing sends out the signal that it is okay to borrow and contributes to the creation of a
debtor culture with messages such as “Why wait when you can get what you want now?” (without having to
do something so apparently old-fashioned as saving up ﬁ rst). Through this, the traditional social condem-
nation of being indebted is becoming erased.
Web and SMS loans are not only marketed intensively. They are also easier to obtain than ordinary
loans. The Internet and SMS media facilitate borrowing. Accordingly, a loan can be obtained at home, by
computer or phone, without a physical meeting with the creditor. The not overly stringent assessment of
creditworthiness, furthermore, increases the chances of getting a loan. The assessment is done “without
budgeting and boring questions”, and frequently the one and only requirement is that the borrower not be
in a debt default register.*2 The answer is provided within a few minutes, after which the amount of the loan
is transferred to the borrower’s account.
However easy it is to borrow, it is equally expensive. The Web and SMS loans address the (typically)
young part of the population, which is accustomed to using electronic media. Especially the SMS loans seem
to appeal to very young borrowers and involve particularly high costs. Thereby, part of a generation is risk-
ing starting adult life indebted—with debt that could follow this part of the generation for many years to
come, as debt relief is only rarely granted to young people and only in rare cases includes consumer loans.
Furthermore, with their assessment of creditworthiness not being the strictest, the Web and SMS loans
are addressed to individuals who are already indebted and who would have difﬁ culty in getting a less cost-
intensive loan (e.g., from a bank). The short maturity of the loans and advertisements stating that one can
borrow when short of money for things such as a holiday trip also illustrate that the loans are directed at
individuals with temporary ﬁ nancial difﬁ culties or with few savings. If you compare Web and SMS loans
with other loans, the following seems to apply as a rough rule of thumb: the shorter the maturity, the higher
the costs. The fact that the formula for calculating the APR depends on the maturity only partly explains
That the high costs of the loans are due to the creditor’s increased risk in connection with these types of
loans seems to be only a qualiﬁ ed truth. The costs related to the loan mean that the amount of the loan will
often be far more than repaid; accordingly, a debtor who is not paying the last instalments is not necessar-
ily a bad piece of business. The loans consist of small amounts, and the risk that a debtor cannot repay the
entire amount of the loan will be spread over the majority of paying debtors. Interest on default enters in if
the loan is not paid back on time and there is assistance of the bailiff’s court in collecting the debt, including
seizure of any property of the debtor.
The focus of this article is on the legal problems related to easy access to non-secured consumer loans
as illustrated by Danish legislation.*4 Since these types of loans are often taken up via electronic means,
this will be used as an example throughout the article. The question is whether the legislation is func-
tioning effectively and provides well-proportioned solutions. If not, which would be the more appropriate
1 See www.SMSlaane.dk. All Web sites referred to in this article were visited on 15 January 2014 and are in Danish.
2 Links to a series of providers can be found at www.laane-siden.dk/lan-penge. See also the site referred to in Note 1.
3 See the calculations from Mybanker.dk A/S in L.L. Andersen, V. Greve. Åger [‘Usury’]. Copenhagen: Thomson Reuters 2010,
p. 161 ff. (NB: all books and articles cited in this paper are in Danish unless otherwise is stated).
4 The electronic means particularly include the Internet (speciﬁ cally the World Wide Web) and SMS, but other means, among
them the Wireless Application Protocol (WAP), are gaining ground in greater numbers. Typically, a computer, which today
also might be a tablet computer or mobile phone, is used as a communication tool in this connection.