The Administrative Court in Stockholm has today announced that it has annulled the Swedish Financial Supervisory Authority’s decision to issue observations and penalty fees to Svea Bank and Resurs Bank for deficiencies in their credit assessment procedures.
Last year, the Swedish Financial Supervisory Authority decided to issue the two banks with observations and penalty fees as a result of the Supervisory Authority’s finding that the banks had not taken consumers’ financial circumstances sufficiently into consideration in credit assessments. The Consumer Credit Act (2010:1846) requires credit assessments to be based on sufficient information on the consumer’s financial circumstances. The loan may only be granted if the consumer is thus considered to have the financial means to fulfil his or her commitment. As a basis for its decisions, the Swedish Financial Supervisory Authority considered that only a credit report obtained through UC along with the banks’ scoring models for assessing the loan-loss risk was not sufficient information on which to base credit decisions. The Supervisory Authority considered that the fact that UC’s register is not comprehensive – it contains no information on tax liabilities, debts to CSN and certain high-cost loans, for example – along with the fact that the companies failed to take into consideration the size of the borrowers’ mortgages or expenses in respect of children, housing and other loans, meant that the banks failed to base their credit decisions on sufficient information on consumers’ financial circumstances.
The banks appealed the decisions and the Administrative Court now upholds the banks’ argument. The Court considers that the Swedish Financial Supervisory Authority failed to show that the banks’ credit assessments were based on insufficient information. Among its reasons, the Administrative Court refers to the fact that the banks showed that they take the factors that are statistically relevant for assessment of the consumers’ creditworthiness into consideration. The Administrative Court also notes that the banks have reported small loan losses and have had few debt collection cases, which indicates that their credit assessments are based on sufficient information, a conclusion that derives from previous standard practice. The Administrative Court therefore annuls the decision by the Swedish Financial Supervisory Authority.