Credit Consumption and Financial Risk Among Danish Households— A Register-Based Study of the Distribution of Bank and Credit Card Debt

Abstract

This article discusses the distribution of widely used consumer loans in Denmark in the light of the “risk position” in which this places Danish households. Denmark has the highest debt-to-income ratio of all OECD countries, yet the high level of consumer debt has received relatively little political attention in Denmark and the social and legal protection of citizens with debt problems is limited. This article presents findings from an empirical study that investigated the distribution of consumer loans in Denmark. Drawing on the notion of “risk position,” the article challenges the idea that only socially marginal groups are at risk of getting into debt problems. The empirical study analysed the sociodemographic distribution of two common types of loan in Denmark (bank loans and credit card debt) based on the administrative register data of a full population of individuals. Register-based data provide much more reliable measures of debt than self-reported surveys, because of non-response problems in surveys. The results show not only high debt levels among hitherto known vulnerable social groups, but also highlight groups of middle- and higher-income wage earners with very high levels of debt. We frame the results in the light of existing policy measures in Denmark and suggest the need for a better balance between deregulation of credit markets and individualization of debt problems on the one hand and the need for political protection of individual loan takers on the other.