(Bloomberg) -- Denmark moved to limit interest payments on consumer loans after annual rates charged by some companies climbed to as high as 800%.
The government and a broad coalition of parties in the parliament agreed to impose a cap of 35%, Business Minister Simon Kollerup said in a statement. The measure is targeted at products often referred to as “quick loans.”
The measure reflects a growing alarming about the loans, which have become more popular as traditional lenders have tightened their access to credit. Denmark's financial regulator on Thursday took the extraordinary step of reminding all credit institutions that they shouldn't give loans that borrowers can't afford to repay, and to review their procedures for determining borrowers' credit-worthiness.
“We have now had a serious showdown with these quick loans, which has trapped especially young and vulnerable citizens in unmanageable debt,” Kollerup said.
Denmark joins a growing number of countries in the region cracking down on companies that charge high rates, amid rising concerns about excessive household indebtedness. Earlier this year, Finland tightened caps while Norway set debt-to-income limits.
--With assistance from Kati Pohjanpalo.
To contact the reporter on this story: Morten Buttler in Copenhagen at mbuttler@bloomberg.net
To contact the editors responsible for this story: Christian Wienberg at cwienberg@bloomberg.net, Frances Schwartzkopff
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