Here attached is the critical assessment by ECRC partner ULC (Union Luxembourgeoise des Consommateurs) of the Luxemburg bankruptcy law proposal (in French). Despite welcoming the legal initiative allowing for private rehabilitation and a ‘second chance’, l’ULC is not content with : the slow implementation of total debt discharge (which in some cases could involve 20 years of proceedings); the lack of distinction between "active" and "passive" causes of over-indebtedness (triggers are 75% of the time caused by exogenous ‘accidents of life’ factors); legal texts using words like ‘abusive’, ‘unscrupulous’ and ‘malicious’ debtors, and referring to a mechanism that will make sure the debtor acquires ‘the necessary techniques and attitudes to adapt his lifestyle to his income situation’.
Inter-Actions, facing cases of over-indebtedness on the ground, reminds us that the risk of debt distress is no longer limited to a specific social class or socioeconomic group, that more and more situations of over-indebtedness are related to fulfilment of basic needs, and that the current economic situation will lead to an increased risk of transition by individuals from a state of indebtedness to one of over-indebtedness.
The ULC which was not consulted during the legal preparatory work calls for a modification of the proposal along the lines of the French bankruptcy law, i.e. calling for the introduction of greater flexibility that will allow prompt debt discharge in cases of a debtor's situation being irretrievably compromised. Furthermore, there is no test of good faith of the debtor, there is no deadline setting a start to procedures, and the composition of the Mediation Committee contains no consumer representation. This later point is becoming increasingly important, and calls for an appropriate representative presence ever more justified, because it is becoming increasingly necessary for the curative treatment of over-indebtedness (the main object of this Act) NOT to be dissociated from the prevention options (which are specifically tied to issues of responsible lending, which fall directly within the scope of activities of consumer organisations).
In its comment, the ULC also mentions its concern about the delay in the preparations for the transposition of the EU Consumer Credit Directive (which should be adopted and published before May 12, 2010). It recalls that the Directive contains a number of regulatory options for responsible lending and does not hinder the power of Member States to strengthen the provisions relating to commercial practices such as marketing and advertising.
The coalition partners support the ULC when it asks for: a modern law on over-indebtedness, a radical strengthening of the law relating to consumer credit, and the inclusion of financial education in school curricula.
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