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Credit and Social Exclusion at the European Economic and Social Committee EESC HEARING: Draft Paper of the EESC and Discussion Paper by Rapporteurs and ECRC supporters.

Preliminary Draft Opinion of the Section for Employment, Social Affairs and Citizenship on Credit and social exclusion in an affluent society (own initiative opinion)(Brussels, 1st June 2007 – SOC/265 – rapporteur: Pegado Liz)

Hearing “Credit and Social Exclusion” (25th June 2007 – European Economic and Social Committee).

The views and opinions of ECRC have been discussed and shared by fellow contributors and staff of the European Economic and Social Committee at the EESC hearing on "Credit and Social Exclusion" held on Monday 25th of June.

The document discussed at the meeting is attached below and constitutes a preliminary draft opinion of the Section for Employment, Social Affairs and Citizenship on Credit and social exclusion in an affluent society. The rapporteur Mr Pegado Liz will be at ECRC’s September 14-15 conference in Brussels to share his views. The revised opinion will be debated and voted in the SOC section meeting on 2 October and on 24-25 October discussion will be held in the EESC plenary session. The subsequent versions of the document will be available later from the EESC website at the link below


TEXT PROF. DR. BERTEL DE GROOTE (Ghent University College – Faculty of Business Administration and Public Administration; Ghent, Belgium)


Congratulating the European Economic and Social Committee and the Study group on Credit and social exclusion in an affluent society with the preliminary draft opinion (SOC/265 - Section for Employment, Social Affairs and Citizenship), as well regarding to the opinion’s quality as to the signal that’s given with it, I’d like to express my gratefulness for the invitation to participate in this debate.

At this stage I’d like to focus my remarks on two topics.

- As I had, being a law professor at the Faculty of Business Administration and Public Administration of the Ghent University College, the chance to observe the Belgian legislation (Law of July 5, 1998) containing an adjustment procedure in cases of overindebtedness, I’d like to point out some considerations on curative measures regarding overindebtedness.

- Presiding the “Vlaams Platform Schuldoverlast” and supporting the activities of the “Observatoire du crédit et de l’endettement”, I’ like to comment on the need of an Observatory.

As my approach may, due to the time scheme, be limited and maybe insufficiently balanced, I’m prepared to further develop at a later stage some of my remarks regarding topics relating to the draft opinion.

As I’m not working directly in “the field” some my ideas may be rather theoretic. On the other hand this allows me to formulate my remarks with a certain distance, that may be useful in the debate.

Allow me to start with a general remark regarding the draft opinion. The opinion must be welcomed, as within Europe overindebtedness is a topic with growing socio-economic relevance. This pan-European phenomenon must also be seen from the point of view of the European economic and financial integration.

Furthermore, the question arises whether a European curative framework might not be useful as people dealing with overindebtedness and their assets are growingly mobile. Though the European Regulation on Cross-border insolvency may be useful to tackle the transborder aspects of insolvency proceedings, it ‘d better be sorted out whether the regulation is satisfactory regarding consumer insolvency.

Having said so, it might be clear that overindebtedness must be dealt with from a preventive as well as from a curative point view. One may thereby emphasize that curative measures must as well strive to a preventive effect.


This brings me to point 6.3.3, entitled “Dealing with debtors and recovery of assets” of the preliminary draft opinion.

I fully underpin the idea that the advisibility of the expression of some fundamental principles, that have to underly consumer insolvency procedures, should be discussed.

In a recent article I tried to evaluate the Belgian legislation regarding consumer insolvency in the light of nine leading principles . I formulated them on the basis of the principles laid down in the International Federation of Insolvency Professionals’ Consumer debt report (2001) and the 2003 Report on Consumer Overindebtedness and Consumer Law in the European Union by professor Reifner and his colleagues.

These principles, summarized underneath, may at least inspire European actions on a curative level.


Consumer insolvency procedures are legitimate. Since, as the report pointed out, the notion of “credit” is a growingly important lubricant in European societies, a legal framework must be developed to allocate the social cost of the inability to pay. Often a combination of indebtedness and accidents of life, leads to overindebtedness. Of course, the more indebted a person is, the higher his financial vulneralibility for the effects of accidents of life. The responsibility must not only be borne by the individual debtor. The concerned creditors, as well as society as a whole, for which exclusion leading to marginalisation is an important burden as well, must bear responsibility. On the other hand, it’d be fault to focus solely on credit agreements, in developing preventive and curative measures. Overindebtedness is often identified by a diverse multitude of debts. Nevertheless in an prominent number of cases credits contribute to the existence of overindebtedness or probably even triggered it. In this regard, a balanced opinion is necessary as well as attention for the optimisation of techniques regarding the definition of overindebtedness and the determination of its causes, as well as regarding their complex interconnection.


Curative measures must lead to a fresh start, as a condition for socio-economic re-integration. Debtors and creditors, as well as society, have a combined responsibility. This must be reflected in the curative measures. Fresh start may imply debt remission, but must, for as far as human dignity of the debtor and his family is not endangered, be condition to maximum payment. After all, the principle of the binding force of obligations must be conserved as a major principle of the legal order of most European countries. Furthermore, the fresh start may be condition to a payment plan that contains measures in view of optimizing the structural character of the fresh start and of the ability to pay.


As the draft opinion correctly states, solutions for which party autonomy is the basis, must be favoured. They rely on a more stable engagement of the concerned parties, they are often more efficient and effective and probably give better way to an integral approach. Therefore measures must be encouraged to favour agreements. As there are often less time restrictions to these solutions, they can favour the possibility for the debtor to preserve essential assets.


As unanimity among the concerned parties is not guaranteed, it is necessary to foresee the possibility of judicial intervention, analogously to a commercial insolvency procedure. This intervention for instance:
- must be binding to the parties;
- must in principle foresee in payment according to the principle of paritas creditorum;
- must suspend individual execution.


Consumer insolvency may have a domino-effect, whereby the caution of a debtor may end in overindebtedness as well. Therefore it is to be questioned whether the effect of a consumer insolvency procedure on the persons who gave security for the debtor, must not be taken into account. This is not self-evident, as a balance must be found, whereby the role of the caution and its function for the creditor’s willingness to lend must be taken into account.


Debt remission must not be given unconditionally. In principle the debtor is obliged with its income and assets. Nevertheless, principles must be formulated in view of balancing the fate of the income and assets of the debtor with the leading principle of human dignity.


Though a consumer insolvency procedure is at best not a pure and simple liquidation and distribution of activa, a payment plan must lead to a fresh start within a reasonable time scheme. If not, there is a growing risk of non-compliance or a growing need to adaptation of the plan. Furthermore a late reintregration is disadvantageous for the concerned parties as well as for society as a whole.


True rehabilitation means non-discrimination. Once the debtor is freed he is entitled to full access to the (financial) market. Measures must be taken to preserve the willingness to contract with him. Negative records in credit history files must be removed and so on.


The cost of a procedure to repair structural imbalances between income and expenses, may not hamper the access to it. Otherwise the procedure is not accessible for the debtors it’s intended for.

Not only must the cost of the procedure be low. The same goes for the need for legal aid during an insolvency procedure and the intervention of a debt mediator, whose tasks are slightly analogous to those of a trustee in bankruptcy.

In this regard, one shall mention the Belgian Fund for Overindebtedness, which contributes to the payment of the mediator and is funded by payments from financial institutions. These payments are related to the amount of unpaid debts, which has to stimulate responsible lending.


Deuxièmement, je voudrais exprimer un court commentaire sur l’idée de la création d’un Observatoire européen de l’endettement. Comme je soutiens, pour ce qui concerne la situation en Belgique, vivement l’Observatoire du crédit et de l’endettement – présent ici – ainsi que le Vlaams Centrum Schuldbemiddeling, mon enthousiasme va de soi.

En soulevant quelques considérations, j’espère pouvoir enumérer quelques arguments pour la création d’un Observatoire et quelques conditions dont la valeur ajoutée de l’Observatoire est dépendante.

Je me permets de limiter mes considérations préliminaires sur ce thème à quatre.

Considération 1

La nécessité d’un Observatoire se situe dans la complexité de la problématique du surendettement : il y un volet juridique, un volet socio-économique, un volet psychosociale etc. Des actions concernant le surendettement, sur le côté préventif comme curatif, doivent prendre en considération tous ces aspects. Par conséquent un Observatoire, hébergeant l’expertise nécessaire ou étant un plateforme entres des pôles d’expertise et disposant d’une vue d’hélicoptère est un atout.

Considération 2

Un Observatoire pourrait servir de forum de discussion pour tous les « stakeholders » concernant le surendettement : juges, médiateurs de dettes, académiciens, huissiers de justice, établissements de crédit.

Bien que ni leurs intérêts, ni leur angle de vue soient nécessairement parallèles, leurs réflexions sont importantes en vue d’avoir une vision fondée pour analyser et attaquer les problèmes de surendettement.

Considération 3

Un Observatoire pourrait être un forum, où se rencontrent les Observatoires nationaux en vue d’échanger de l’expertise, de bonnes pratiques, d’expérience. En collaboration avec les partenaires nationaux, un Observatoire européen pourrait développer une approche européenne. De bons accords permettent que les efforts mutuels se renforcent et assurent une répartition efficace des tâches aux différents niveaux.

Considération 4

Un Observatoire pourrait au mieux avoir une quadruple fonction.

- Premièrement, il crée de l’expertise et permet la dialogue en vue de la préparation des instruments de politique dans la lutte contre le surendettement dans le sens large.

- Deuxièmement, l’Observatoire assure la coordination de l’exécution des instruments de politique dans la lutte contre le surendettement, par exemple en développant des actions de sensibilisation ou des programmes d’éducation financière.

- Troisièmement, l’Observatoire pourrait remplir la fonction d’information du public en matière de surendettement.

- Quatrièmement, dans le cas des mesures européennes dans la lutte contre le surendettement, l’Observatoire peut se montrer, comme coordinateur, centre d’expertise, d’appui et de formation, éventuellement par le biais des organismes nationaux, pour « le terrain ».


Je finis mes observations en vous signalant quatre petites remarques auxquelles je tiens pourtant fortement. :

- de l’expérience Belge, je vous rappelle le rôle d’un fichier positive comme négative, en vue de la concrétisation du devoir de responsabilité en matière du crédit…du côté du prêteur et de l’emprunteur.

- Malgré tous les efforts exprimés dans l’avant-projet d’avis, il faut se rendre compte qu’un important problème sous-jacent concerne la tension entre le moyens et le coûts récurrents d’une famille.

- C’est entre autres dans l’éducation financière qu’il nous faut entamer la lutte contre le surendettement., puisque les enfants peuvent apprendre leurs parents à avoir une approche « saine » envers le crédit.

- La lutte contre le surendettement est difficile, en ce qu’on doit veiller à atteindre souvent les plus vulnérables dans la société. Ceux-ci risquent d’être tenté de s’acheter une place dans la société…en utilisant le crédit qui risque de les en éloigner même plus.

Tout en vous remerciant de votre attention pour le résumé de mes remarques, je suis à votre disposition pour une discussion plus profonde.

Bertel De Groote
Brussels, 25-06-2007

ID: 39885
Author(s): iff
Publication date: 27/06/07

Link to EESC website

Created: 28/06/07. Last changed: 10/07/07.
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