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Fire off a simple text message, wait 15 minutes and presto, 300 euros land in your account; the simplicity of obtaining SMS loans in Sweden is increasingly luring youths into debt.
"The first (SMS) loan was given in the middle of March 2006," said Janne Aakerlund, a spokesman for Sweden's debt recovery agency Kronofogden, adding that the first bill collectors were sent out just three months later.
Since then, the number of un-repaid text message loans has soared: in 2007, Kronofogden was tasked with collecting debts from 20,000 such loans, 35.9 percent of which were granted to people aged 18 to 25. "There is reason to be seriously concerned about this development," head of the Swedish Consumer Agency, Gunnar Larsson, told AFP.
The new lending system, he says, has enabled people usually barred from receiving loans, like teenagers and other low- and no-income groups, to borrow cash in no time flat. But then the loans, on average amounting to 3,000 kronor (320 euros, 500 dollars), along with average fees of 500 kronor and interest payments of 50 kronor, must also be repaid at a breakneck speed of just 30 days.
And if the loans are not repaid in time, borrowers are "trapped" in a vicious debt circle and are in many cases forced to take new loans to repay the sky-high interest rates and late charges that ensue, Larsson and Aakerlund explained.
"The loans are granted for one month and at the end of the month there's simply not enough money to pay back the loan and the fee," said Larsson, calling on creditors to improve their credit-checks before lending money.
Carl Rosenbaum, a spokesman for Mobillaan Sverige, the first company to offer SMS loans in the Scandinavian country in 2006, insisted however that the criticism was "exaggerated." He pointed out that the loans, which also exist in the United States and several European countries, have been well-received by Swedes, renowned for high consumption habits and enthusiastic early-adapters for new technologies.

Copyright Agence France-Presse, 2008

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