On March 15, 2023, the Danish government announced that it is considering amending the Act on Consumer Loan Companies (lov om forbrugslånsvirksomheder) to regulate providers of buy-now-pay-later (BNPL) products.
If adopted, the BNPL regulation will take effect from July 1,2023, meaning providers in Denmark will be required to do creditworthiness assessments from this date.
Further to this, they will also need to apply for a consumer lending licence before January 1, 2024, though they will be able to continue operating without a licence during the application period.
The move comes as BNPL scrutiny increases across Europe, with the British FCA looking to regulate BNPL payment products in the UK, and the EU aiming to revise existing rules on consumer credit to include BNPL loans.
Denmark has already introduced a range of initiatives with the intention of strengthening consumer protection.
If implemented, this new amendment will bring the regulation of BNPL providers into line with banks and other loan providers in Denmark.
These financial institutions have been required to gather more in-depth financial information on loan applicants, since legislation on creditworthiness came into force in Denmark in 2021.
Further details on the proposal can be found here (in Danish).
How banks and lenders in Denmark meet legislation requirements
Many of Denmark’s leading banks and financing companies work with Monthio, a powerful solution that enables financial institutions to adhere to regulations while continuing to provide a quick and easy service to applicants.
How Monthio helps banks and loan providers
Monthio helps loan providers increase the speed and accuracy of underwriting decisions by digitizing the loan approval process.
Monthio uses open banking & other financial data to provide you with a 360 financial overview in real-time, including income and expenses verification and extensive insight into risks and warnings. All the consolidated data is available through our API or presented in one easy-to-use dashboard meaning quick and easy decision making.
As well as helping credit providers adhere to regulations, Monthio helps optimise customer experience, by reducing the time and pain of loan applications.