We will continue to emphasize this issue until it is resolved: over-indebtedness in Sweden is a significant problem. We are pleased that policymakers are recognizing this and taking action, but we believe that more can be done and faster.

Yesterday, we joined the Civil Committee in the Swedish Parliament to discuss over-indebtedness in Sweden. As we’ve always said, we are against predatory credit practices. That’s why we’re encouraged to see policymakers addressing harmful credit practices and enhancing consumer protection.

The Urgent Need for Regulation

For far too long, unscrupulous lenders have been allowed to exploit consumers with high-interest unsecured loans, commonly known as "blanco loans." These loans are characterized by high interest rates and extended repayment terms that can trap consumers in a vicious cycle of debt. The situation has now reached a critical tipping point, with the "blanco loan bubble" valued at 250 billion SEK. This bubble is showing clear signs of bursting, exacerbated by rising interest rates. Data from Finansinspektionen reveals that the average blanco loan balance in 2021 was slightly over SEK 110,000.

Blanco loans are designed to keep consumers in perpetual debt, encouraging them to extend their repayment period, often up to 20 years. Over such an extended timeframe, borrowers end up paying significantly more in interest and fees than the original loan amount. Alarmingly, the full extent of these costs is seldom communicated clearly to consumers at the time of application and commitment. This lack of transparency has trapped many Swedes in debilitating debt. In stark contrast, Klarna's average transaction value is a modest 802 SEK, with less than 0.5% of transactions proceeding to collections.

The Path Forward: Necessary Reforms

To effectively combat over-indebtedness, the credit industry must undergo substantial changes. Klarna has already taken steps to make its products more sustainable and consumer-friendly, yielding positive results for our customers. However, we cannot achieve meaningful progress alone; industry-wide reforms are urgently needed to curb predatory lending practices. 

Here are the necessary reforms to create a fair and sustainable credit market in Sweden:

1. Rate Cap: It is not necessary for any lender to add 40% to the reference rate. 20% is a fairer cap level.

2. Transparency in Credit Information: Ensure that consumers genuinely understand the costs associated with credit, moving beyond mere box-ticking exercises.

3. Remove Setup Fees: Eliminate setup fees, which are unnecessary in a healthy credit market.

4. Comprehensive Credit Assessment: Conduct proportional credit checks tailored to the value and risk of each transaction.

5. National Debt Registry: Establish a national debt registry for unregulated credit over 15,000 SEK, with mandatory reporting within 30 days. This registry should be publicly controlled.

Klarna is fully committed to these reforms to reduce consumer over-indebtedness and foster a fair and transparent credit market in Sweden. We look forward to collaborating with policymakers and industry stakeholders to bring these crucial changes to life.