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The EBF welcomes the opportunity to respond to the consultation on the preliminary findings of the Civic Consulting study: The over-indebtedness of European households: updated mapping of the situation, nature and causes, effects and initiatives for alleviating its impact.
As a general comment, the EBF would like to stress that the interim report does not provide sufficient detailed information regarding the sources or the content of its findings. With this in mind, the EBF would welcome the possibility to be consulted on the final report, once the study has been made public. The more especially so, given the number of cases in which the findings are not fully in line with the figures of the Banking Industry.
Definition of over-indebtedness
The EBF considers it important for the European Commission to highlight each of the characteristics of over-indebtedness across Europe in order to build a shared European approach. The EBF believes that the assessment of over-indebtedness should take into account wider issues other than those of financial services. Namely, those encompassing the lack of ability to pay on other types of commitments for a family or a consumer, such as local taxes, rent, utilities bills, telecom bills, healthcare and education costs etc.
Causes of households’ over-indebtedness
According to the interim report, macro-economic factors are one of the important causes of financial difficulties. The EBF is particularly alive to the fact that credit should in no uncertain manner be understood as a cause for indebtedness. Indeed, the EBF does not believe that borrowing should be regarded as a cause per se of financial difficulties. The Consumer Credit Directive requires that lenders assess the creditworthiness of the consumer and the affordability of the credit before lending, so borrowing should not create a financial difficulty.
Consequences of over-indebtedness and measures to alleviate the impact of over-indebtedness
The EBF is concerned that most solutions reported in the document abstract relate only to lending procedures. The EBF agrees that the multi-dimensional aspects of over-indebtedness are best addressed at national level but believes these must include reference to the handling of debts not associated with financial services, such as utility arrears, tax debts etc. Consideration should also be given to the potential benefits of the use of insurance products to guard against life changing events that could lead to financial difficulty.
Importantly, the EBF considers the existing EU regulatory framework covering lending transactions to be comprehensive and would like to stress that the existing texts, and those currently under negotiation already contain measures which are key to ensure fair lending: Consumer Credit Directive, Mortgage Credit Directive, Unfair Commercial Practices Directive.