Icelandic

So i herd you enforce the no-loanwords policy in Icelandic, remove everything foreign, etc.
Does anyone really follow it in colloquial speech?
Or, by far, does anyone really use Icelandic in everyday life?

anyone have any links on this?
I can't imagine how a policy like this would be enforceable. I mean, unless they go really crazy and make you pay a fee for using foreign words, there's no way the government has much influence on anything other than official documents and school books.