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Indexation of Consumer and Mortgage Credit in Iceland in 2014: A Critical Battle between Legality, Fairness and Legitimacy

International Journal of Finance & Banking Studies

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Title Indexation of Consumer and Mortgage Credit in Iceland in 2014: A Critical Battle between Legality, Fairness and Legitimacy
 
Creator Mendez Pinedo, Maria Elvira; University of Iceland
 
Subject Finance; Banking; Credit; Law; European Regulation
Indexation of credit; Iceland; European Economic Area; Consumer protection
 
Description Six years after the financial crisis that led to the collapse of the banking system in 2008, the over-indebtedness of households is one of the most important problems in Iceland. This study aims to cast light on a specific feature of the Icelandic credit system in connection with the problem of over-indebtedness. The main research question is whether the end of indexation of credit is close or not. The author argues, in the first place, that indexation of credit ex-post to the consumer price index (CPI) in negative amortization schemes is responsible for over-indebtedness. In the second place, the author describes the challenges ahead in the field of consumer and mortgage credit in Iceland in the light of European law (European Union EU and European Economic Area EEA). The incorporation of Directive 2008/48 on credit agreement for consumers to the Icelandic domestic order through the EEA Agreement allowed a preliminary legal review of the practice in light of EU/EEA consumer credit law, both at national and European level without a final conclusion. It has nevertheless led to the judicial review on the legality of some indexation alleged malpractices before national courts and to the EFTA Court for interpretation (mostly on Directives 93/13/EEC on unfair terms 87/102/EEC on consumer credit). A ruling from the Supreme Court is expected on several cases. A critical battle between the legality, the fairness and the legitimacy of indexation of credit is taking place in Iceland under the influence of European law.
 
Publisher SSBFNET
 
Contributor —
 
Date 2014-11-03
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://www.ssbfnet.com/ojs/index.php/ijfbs/article/view/356
 
Source International Journal of Finance & Banking Studies (ISSN: 2147- 4486); Vol 3, No 4 (2014): October; 41-67
2147-4486
 
Language eng
 
Relation http://www.ssbfnet.com/ojs/index.php/ijfbs/article/view/356/288