In April 2014, the European Economic and Social Committee drew up an exploratory opinion on Consumer protection and appropriate treatment of over-indebtedness to prevent social exclusion. The links to the paper are available below.
A short description of the EESC Calls and recommendations include the following:
- Calls for a common definition: The EESC is extremely concerned about the problem of over-indebtedness, it notes that there is still no harmonised definition of the concept of over-indebtedness and no means of getting an accurate picture of the situation in the Member States. It therefore to be adopted. This should include the following elements: (i) the household, as a relevant unit of measure for quantifying over-indebtedness; (ii) financial commitments; (iii) informal commitments within the family or a community; (iv) inability to pay; (v) structural over-indebtedness; (vi) decent quality of life, and (vii) insolvency.
- Calls for multi-pronged approach: If over-indebtedness is to be properly addressed, education, prevention and appropriate procedures for reintegrating over-indebted people into normal economic life are needed (including stakeholder information campaigns)
- Calls for an appropriate, uniform procedure for pre-empting and dealing with situations of over-indebtedness: E.g. through principles that must include the procedure being quick and free of charge, the suspension of proceedings when a procedure for containing the over-indebtedness has been opened, verification of claims, keeping the main residence, equal treatment of ordinary creditors, the possibility of cancelling debts in the most burdensome situations and the obligation to leave an over-indebted person enough to live on decently day to day, the aim being to reintegrate the consumer into economic and social life quickly.
- Calls for banking inclusion: safeguarding to avoid any social exclusion.
- Calls for a European framework for usury:
- Calls for greater compliance with the legal texts: It supports the concept of „responsible credit“, which requires distributors and underwriters to use fair, ethical practices.
- Calls for financial education to be integrated into school teaching curricula
- Calls for these credit cards‘ period of validity and credit limit to be strictly regulated in cases of aggressive marketing.
Some examples in the opinion include:
- Vulnerable population groups are worse affected by debt as they do not have access to all forms of credit owing to their poor creditworthiness and are thus directed towards the most costly options; Although they are not exactly the same in each Member State, consensus is emerging on the main causes of over-indebtedness. However, we do not have the means to evaluate the situation at European level with the necessary accuracy; There are no European records. what is meant by „over-indebtedness“ and on the criteria and methods for measuring it).
- Establishing a common European working definition of over-indebtedness
- Preventing over-indebtedness (e.g. via Financial education and responsible consumption, and publicise and support existing European facilities).
- Facilitating responsible lending and dissuasive penalties for breach of professionals‘ information obligations. (especially product offers and advertising onwards, as well as in the advice and explanations, ”The EESC supports the concept of responsible credit, in the sense that it makes the contractual partners accountable. Controlling lending with the help of registers is in line with this approach.”
- Regulating credit and the personal credit sector (Directive 2008/48/EC on credit agreements for consumers is based on consumer information, is not sufficient to prevent over-indebtedness, these must warn consumers against certain abuses, or remind them of their right to receive a detailed repayment schedule; need to be more incisive and ambitious than Directive 2006/114/EC concerning misleading and comparative advertising, banning certain forms of misleading or abusive advertising, particularly where they target vulnerable consumers or consumers who are already unable to pay off their debts)
- Fighting usury (better protection through a European framework for usury based on the APR that can vary according to the type of credit and the amount borrowed).
- Dealing with over-indebtedness (Judicial procedures for containing over-indebtedness is to aim to find a solution that will enable households to avoid social exclusion and, where possible, to pay off their debts as far as their means allow (see opinion of EESC on Business insolvency law); Most European countries have introduced judicial procedures for dealing with over-indebtedness, which vary in type and as regards conditions of access and the nature of the debts concerned; EESC stresses the need for provision to be made at European level for certain essential property not to be seized on any account nor sold for a low price);
- Providing a high level of consumer protection to help consolidate the single market (e.g. assistance facilities for over-indebted people via social assistance services and free legal assistance; A facility must be put in place for analysing people’s specific situations, verifying the legality of the sums claimed from them, negotiating a debt settlement plan with their creditors or working on other solutions such as judicial proceedings, informing them of their rights and obligations).
- European over-indebtedness observatory (based on existing national systems and should make up for the current lack of reliable statistics, making it possible to analyse the causes of over-indebtedness and the groups of people concerned in depth, to compare the situations in the Member States and the measures proposed for remedying them and to measure the development of the phenomenon; Could be supplemented with a forum, open to all stakeholders for dialogue on good practices; preventing social exclusion requires a holistic approach; The observatory could be made up of departments dealing with the following issues: data collection, existing legal frameworks and awareness-raising and education campaigns; public (e.g. experts appointed by MS) and private sector membership of observatory).