ECRC Subprime Declaration

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We, the undersigned, hereby express our profound concern at the current world-wide credit crisis and the irresponsible lending which has created it, and which has remained unrestrained despite the warning issued by both the Council of Europe, in June 2007, and the European Council, in November 2001, that an indebted society was creating the risk of instability in the money system. In particular, we deplore practices, such as

• Irresponsible mortgage products
• Credit cards secured on borrowers' homes
• Costly revolving credit with ballooning interest charges
• Cross-selling of loans and insurance products with hidden ‘kick-back’ provisions
• Transformation of fixed-rate loans into variable rate loans prior to increases in interest rates or loans on misleadingly advantageous introductory terms
• Short-term lending extended on terms which trap into lifelong commitments and dependency
• The replacement of instalment credit with open-ended and variable rate credit
• Pyramiding of existing debt with further credit
• Loans on usurious terms

We are mindful that the causes of the current crisis include:

• Irresponsible lending has been a major cause of the recent escalation in house prices, creating artificial temporary demand
• Deregulation of the credit and investment markets caused lack of transparency, which has exposed the worldwide community to unacceptable and uncontrollable levels of risk of financial instability

We are mindful that the consequences of the current crisis include:

• This credit and banking crisis has had a profound and adverse effect on everyone and primarily on the welfare of the most vulnerable consumers, on small businesses and on public finance, to the detriment of all taxpayers
• In the UK, the USA, France and Germany, billions of pounds, dollars and euros of taxpayers' money have already been spent on rescuing banks from insolvency caused either by reckless lending or investment in packaged portfolios containing loans of that nature
• As much as € 800 billion in dormant, non-performing loans may currently remain outstanding, which sum is increasing daily and threatening to deepen this crisis in the course of the next 10 years
• The banking industry has profited from this increase in debt to the detriment of general social stability and well-being
• Providing the banking industry with additional cheap money in order to maintain confidence and the availability of credit may be necessary but is only a short-term solution provided at great expense to the taxpayer
• Responsible lending is impeded if the cost of irresponsible lending are displaced onto third parties in the market without any transparency in the process.

In order to secure the restoration of confidence and stability in the financial markets and to protect consumers and vulnerable members of society we demand

• Action up to and including legislation by the EU, the US Government, other national governments, and recommendations from international bodies requiring adherence to the seven principles of responsible credit, and an evaluation of existing practice and legislation on the same basis.
• Investigation and a risk assessment by national governments and regulators of the quality and implications of existing credit products and the ways they are marketed and their effect on families all over the world.
• An international independent forum at which suppliers, governments, regulators, consumer organisations and advocates will meet to discuss the reasons for this credit crisis and to recommend ways in which confidence can be rebuilt in the financial markets.
• An increased soundness of the refinance sector through improved financial supervision and risk distribution, through greater transparency and greater scrutiny of credit rating agencies.
• That financial regulatory authorities provide protection against irresponsible lending in order to secure the stability of the finance markets and ensure, through international co-operation, that the market and consumers are given effective protection against irresponsible credit agreements and their de-stabilising effects.

The present Supporters of the Declaration to date are:

• - National Coalition for Community Reinvestment / USA
• - verbraucherzentrale bundesverband e.V. / Germany
• - Debt on our Doorstep / United Kingdom
• - Brasilcon, Prof. Claudia Lima-Marques / Brazil
• - Bundesarbeitsgemeinschaft Schuldnerberatung e.V. / Germany
• - Free Legal Advice Centres Ltd. (FLAC) / Ireland
• - Observatoire de la Finance / Switzerland
• - EKPIZO Consumers Association "Quality of Life" / Greece
• - Maryellen Lewis, MSU Community & Economic Development Program / USA
• - Rosemary Conaty-Fogitt, eurotranslations - online / Great Britain
• - Ass. Prof. Dan Immergluck, Georgia Institute of Technology / USA
• - National Consumer Research Center / Finland
• - Dr. Rodica Diana Apan, North University of Baia Mare / Romania
• - Prof. Florin Ciutacu, University Dimitrie Cantemir Editura / Romania
• - Dr. Aurelia Ciacchi, ZERP Zentrum für Europäische Rechtspolitik Bremen / Germany
• - Arbeiterwohlfahrt e.V. Potsdam / Germany
• - Neue Richtervereinigung (NRV) / Germany
• - Verbraucherzentrale Hamburg / Germany
• - Katholischer Verband für soziale Dienste in Deutschland e.V. / Germany
• - NVVK (Nederlandse Vereniging voor Volkskrediet) / Netherlands
• - Benoit Granger, MicFin / France
• - institute for financial services e.V.(iff) / Germany

click here to download an updated list of supporters