In this blog post, Egil Årrestad explains how the introduction of a regulated debt register in Norway has contributed to reducing unsecured consumer debt by NOK 14,8 BN.
Previously, it was easy to obtain consumer credit, not just from one lender, but several. Aggressive marketing led to a significant growth in the consumer lending market, more defaults, and an increased number of debt victims. Norwegian authorities initiated several measures to dampen the growth, and a new debt information law with the introduction of debt registries was one of those measures.
Services launched in July 2019, and 16 months later we can determine that it has been a success. Total consumer debt this year has been reduced by 8 %. The corona situation has contributed to the reduction, but there is little doubt that the debt registries has provided better insight to consumers into their own debt and reduced risks for the banks. TietoEVRY with the subsidiary Gjeldsregisteret AS is a central contributor in this regard.
Gjeldsregisteret has a license from the Ministry of Children and Families in Norway to operate as a debt information company. With the introduction of debt registries, the authorities aim to prevent debt problems in private households by enabling banks and other credit providers to access information and better understand how much credit and consumer loans a loan applicant already has. This provides financial institutions with a better basis for credit decisions, at the same time as loan applicants can expect better financial advice from lenders on their own loan capacity.
Norwegian authorities considered both public and private models for operating debt registries. They landed on a private model and facilitated competition for debt information services in the Norwegian market. It is stipulated by law that debt information services must be operated in separate companies. Besides Gjeldsregisteret AS, TietoEVRY has also established services the banks can use for the reporting of debt information to the debt information companies. Two other debt information companies have also established themselves in the Norwegian market.
The purpose of the debt registries is to facilitate more precise credit assessments by providing banks, municipalities and other law regulated users a tool to assess how much consumer debt loan applicants have. Quality is secured by the fact that all financial institutions with operations in Norway must always report debt information in a standardized manner to the debt registries. Initially, services included unsecured consumer debt, which mainly consists of credit cards and consumer loans. The authorities will, during 2021, consider if the service offering shall expand to other types of debt, for instance, mortgages and car financing.
Given the experience with a total reduction in unsecured lending thus far this year of NOK 14.8 BN (-8 %), from NOK 190,8 BN to 176,0 BN, there is a high probability that the registries will be expanded. The banks also report that debt registries are functioning very well and have become an important tool in credit assessments. They contribute to prohibiting the acceptance of consumer loans or credit cards to people who have too much-unsecured debt.
Furthermore, experiences from Gjeldsregisteret show that most people use the tool to obtain better control over one’s own economy. All consumers can safely and securely log into the debt registry via the national ID-Portal and obtain their own debt information. Gjeldsregisteret alone has had more than 1.7 million logins from consumers. This provides a basis for sorting out unused credits, and good documentation if one is in a difficult position and in need of debt counseling. If errors are observed, the consumer can easily report to the bank, and the result is that quality in the register is continually improved.
Gjeldsregisteret has also established service with insights based on statistics and analysis. This provides public authorities, researchers, financial institutions, municipalities, and other interested parties with good insights into national and regional development in the debt market.
The establishment of regulated debt registries with reporting duties for all financial institutions has shown to be a success in Norway. Lenders and consumers have, in a short time, been provided with a new tool that improves the information concerning a loan applicants’ total unsecured debt. The possibility to obtain more debt than one may handle has been significantly reduced. This leads to fewer debt victims and reduced losses for financial institutions and is thus a win-win for both parties.
The challenge of debt is not unique to Norway. The situation is similar in Sweden and Finland, where no regulated debt registries have been established so far. It will be interesting to see if the other Nordic countries will follow the Norwegian example and consider equivalent solutions for reporting and application of debt information.
Egil has expertise in central public registers, credit, business and market information. As a manager at EVRY and TietoEVRY, he’s had responsibility for critical deliveries to public authorities, municipalities, and financial services.
He's currently the CEO of Gjeldsregisteret AS, a wholly owned subsidiary company within the TietoEVRY Group, which has been granted a license from the Norwegian Ministry of Children and Families to act as a debt information company.