Credit Agreement Act

The Danish Credit Agreements Act, commonly known as the Credit Agreements Act, is a law that aims to safeguard consumers and their rights in connection with loans and loan offers.

The law is popularly known as a consumer protection law as its purpose is to protect the consumer/borrower.

The original law dates back to 1991 and replaced the then Credit Purchase Act.

What is the purpose of the Credit Agreements Act?

The purpose of the Credit Agreements Act is to protect consumers/borrowers who want to establish a credit or loan with a trader.

Med kreditaftaleloven ønskede Folketinget at skabe bedre rammer for låne- og kreditvilkår, så visse elementer i en låneaftale altid er tilgængelige og synlige for forbrugeren, eksempelvis de årlige omkostninger i procent (ÅOP) og lignende.

Making these conditions a legal requirement also makes it easier for consumers to compare different loans.

What does the Credit Agreements Act contain?

The Credit Agreements Act contains a number of requirements and rules that a trader must comply with when dealing with a borrower. For example, traders must disclose the annual percentage rate of charge (APR) so that the consumer can easily understand their loan and compare loans across providers.

In addition, the Credit Agreements Act also contains provisions on:

• The creditor's duty of disclosure (Chapter 2, §7).
• Assessment of the consumer's creditworthiness.
• Requirements for the credit agreement.
• Covers.
• Calculation of APR.
• Right of withdrawal.
• Redemption before the due date.
• Default by the consumer.

A much debated and discussed element of the Credit Agreements Act is §8C, "Mandatory reflection period when entering into agreements on short-term consumer loans".

In 2017, the Danish Parliament introduced a 48-hour reflection period for short-term consumer loans (typically payday loans).

This is an excellent example of how the Credit Agreement Act helps protect the consumer in a credit and loan relationship.

Read more about the Credit Agreement Act

If you are a consumer or business and want a more detailed picture of the Executive Order on Credit Agreements (Credit Agreements Act), we recommend that you read the legislation in its full text.

You can find the entire Credit Agreement Act on Retsinformation.dk here:
https://www.retsinformation.dk/eli/lta/2019/817