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USURY CEILINGS IN FRANCE (I) - US and UK seen by French Cofinoga as Best Practice. Rules of Responsible Credit are ignored in France. Pretended alliance of credit provider with independant social research and alternative finance does not exist.
Strange correlations between overindebtedness, social credit, and community reinvestment through mandated research.

The French financial services provider LaSer-Cofinoga (owned by the Group Galeries Lafayette and Cetelem (itself part of the group BNP Paribas) campaigns for deregulation in France and an open door to Anglo-American practices of credit extension. Usury ceilings and central database regulation should be revised following the “promising” examples of the UK and the USA. Community reinvestment and research on overindebtedness are used as arguments to open the market for credit and debt.


In a special issue of “Audience”, their quarterly journal which combines information on credit and money (but whose May edition also contains a somehow misplaced third world human rights commentary), Cofinoga reports on its own study on credit exclusion in France, a task accomplished for this bank by Prof. André Babeau.
In a somehow injudicious coincidence with the DTI study against usury rates in the UK (which used supposed empirical evidence from Germany and France), the study comes to the conclusion that due to strict consumer protection regulations in France only proportionately half of those served in the UK and the USA can get access to credit.

Persons under 25 years of age are especially strongly under-served. These people are said to have sufficient means to pay back their debts (i.e. they are not excluded for reasons of low solvency or creditworthiness), but that because access to credit is supposedly being refused, 2.5 million French people are believed to rely solely on their overdraft facilities. He draws a picture of a black market for credit where seemingly about 300 to 400,000 French people get credit from non-licensed lenders, and produces figures such as: 20% of all those rejected by the formal sector use the informal sector; and that basically 40% of French people can be considered as excluded (compared with only 25% in neighbouring states).

The study is juxtaposed and underlined by reports from Kent Hudson (a private consultant from the US who together with the French American Foundation promotes Community Reinvestment strategies for France) and André Babeau who did the commissioned study on exclusion in France. Cofinoga and Professor Babeau argue that the American example of free credit for all should be followed in France. The American legislation, which the ICRC itself criticises for its ignorance towards predatory lending practices, is praised as being “not punishing but encouraging” (p.4) and that it should be taken as a model to overcome the slums in France.


In addition Cofinoga, presents the photos of Hudson, George Gloukoviezoff a young researcher on financial exclusion at Lyon University, and Jacques Pierre (from the microlending organisation France Active) below the headline of “Are the United States the Banking Model for our Suburbs?”.

In a letter to ECRC the Gloukoviezoff has expressed their suprise that their photos and words had been put into such an environment and misunderstood as support of this campaign as the previous news assumed. We have documented this letter in a separate news (see link below). A statement of Kent Hudson is still missing.


a) This strategy known in the UK, by these French banks as well as by DG Market in Brussels claims credit for all without questioning whether all people need credit alike. But unlike the Brussels and English policy makers, the French admit that a number of households cannot be served by a market model alone. These 20% of households should therefore be served by social credit systems like ADIE and the Social Cohesion Fund which backs credit to excluded households in France.

b) However, in return for acknowledging free-market limitations, Cofinoga wants a liberalised market so that the company can then serve the rest of the population that do not fall within this 20%.

An apparent alliance seems to have been built between alternative/social lenders and the agents of market deregulation.


The campaign including Kent Hudson seems to ignore that in the US (via NCRC) and the UK (via DOOD), community reinvestment is seen as a quest for more quality in credit extension and with significant regulations that are able to stop predatory lending practices towards the poor. France is still a good example of a country, where predatory lenders have not become important to such an extent that legislators, as is the case in other countries, are only able to design solutions in the sole area of information rights.

Furthermore, this seeming research does not reveal current or recent figures of how much of the population can and will be served by alternative financial institutions. The actual figures are below 0.01% and the contracts Cofinoga has made with entities such as ADIE and the Cohesion fund to date are far from making up the so-called gap and improving the situation.


The recourse to what is presented as scientific research combined with social actors has one major flaw. It confuses the non-use of credit with exclusion. Exclusion according to the UN definition occurs when actual needs are not met. So in the first instance, needs have to be shown to exist, only then can one study whether those needs can/are being satisfied through credit in their proposed forms. Credit makes future income available. The “no-hope” suburbs around Paris may have more problems with future income than with present credit. If credit is extended without the prospect of future income, it reduces the real value of daily expenditures through interest and fees.

We know from empirical research that credit still occurs everywhere in society. Solidarian family systems provide up to 13% of credit in needy situations in Germany. Such credit is mostly free of charge, adapted to the situation of the family and does not feature prosecution against insolvent family members. Should we destroy these systems by introducing “Provi-loans” into north African emigrant families in France?

Also, claiming that overdraft credit is a good indication of the lack of access to true consumer credit loans, is a strange thing to do. The contrast between negative current account balances, with say, payday loans with interest rates above 200% p.a. is stark, and one could be inclined to think that such high interest rates must somehow reflect exclusion rates if one is to comprehend the demand for such costly credit. A flexible overdraft on a bank account at a public savings bank in Germany is actually a major tool to prevent overindebtedness there.


The way this study has been presented, and its impact on national policies, reminds of the English example where the DTI ordered an empirical study on Germany and France that claimed that replicating their existing usury ceilings in the UK would further exclusion, and that they should not be introduced into the UK. iff’s analysis found no empirical data that could have backed these findings. The sources and methods of this “research” were never disclosed to the public. DOOD is still asking under the UK public information act for their release.

This “research” was then backed by a letter from the Personal Finance Research Centre in Bristol to the House of Lords signed by the well-known researcher on overindebtedness Elaine Kempson, which pointed out to respective own in-house research which again was not identifiable. Serious research would have taken the case of Germany between 1976 and 1981 or Italy in the recent years where ceilings were introduced. A study made in Maine, USA, on the effect of newly introduced rate ceilings has shown that according to Prof. Andy Spanogle, access had been as high as before, with only the difference that predatory lenders had left the state since. Perhaps the Centre for Credit and Consumer Law at Griffith University, Australia, which is currently undertaking research on the merits of interest rate ceilings, will shed some light on empirical realities.

A number of credit research institutes have taken part in different campaigns for the liberalisation of credit regulation. Mostly financed from the supplier side the outcome was less influenced by the attitude but by the underlying questions which often force into inadequate research. To confound exclusion with lack of use is such a basic bias in this kind of research that more theoretical work and independence should be required. The European Consumer Credit Research Institute ECRI where Providential is an important partner furthers such confusion with its quite disperse expert groups of its European “consumer finance network”. (for a complete list of the members of this network see With respect to the French campaign Prof. Babeau fits into this pattern. He is known from his work for the Observatory of European Savings (OEE) where he chairs their orientation committee and delivers studies on overindebtedness. OEE is a supplier based research unit that “regroups major financial players” ( But for this Cofinoga research he was cited as representing BIPE a consulting firm that promises to guide management decisions “to gauge the consequences of regulatory or fiscal changes on the company and/or sectors”. This alliance between Babeau and Elaine Kempson, who coincidentally joined together in a recent bid for a tender on defining overindebtedness in Europe called in by DG Social Policy, parallel their respective efforts, and seem to counteract the efforts of the “coalition for responsible credit”.

In Germany the SCHUFA (central database organisation for payment incidences of all suppliers), who since 2004 issues its annual report on overindebtedness (Schuldenkompass) in Germany, has taken the same steps. While in the beginning it invited its critics to join their efforts to produce a much more open report with different opinions and scientific independence, the large success with the media that followed publication seems to have induced them to return to mandates for small predefined research. However, because the underlying questions are condemned to produce the wanted empirical results, the power of interpretation remains clearly with the mandator.


Banks may fail to achieve their goals if they intrude and interfere too heavily in scientific research with their political marketing activities. They may be quick in ruining the good reputation of researchers who have to rely on private mandates nowadays, at the cost of getting credible results without a pre-defined agenda. The public and the media sometimes turn round much quicker than expected and disappointment about biased research that had been labelled as impartial is a much stronger driving force of political reactions than mere numbers and figures.

ID: 37725
Author(s): iff
Publication date: 28/06/06

CRÉDIT ET EXCLUSION - Audience No 30 LaSer Cofinoga

Reaction by George Gloukoviezoff including his paper on CRA

Created: 28/06/06. Last changed: 08/08/06.
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