Overindebtedness is a driving force for social segregation and the increase of poverty. It works as a self-fulfilling prophecy. Banks and the EU declare people with moderate means as a high risk. Lenders are supposed to refrain from extending credit to them. This would cut them off the only sustainable form of liquidity for their unstable income in an economy which shifts to monthly payments for everything you need. Banks seem to withstand. Where they themselves do not lend they create subdivisions for the poor. But they use the weakness of such consumers and the threat of legal exclusion to charge usurious prices adding useless insurance with extreme kick-back insurance (PPI), brokerage fees, credit card and overrunning, flipping (anatocism), and risk-based prices. For the vast majority of poor people this is a nightmare. Many of those who fail would have paid their debt in full if charged normal prices and supplied with average products. They go bankrupt because they are declared a risk. This risk seems to justify that they alone (not the wealthy clients) have to shoulder the cost of the effects unemployment, illness, divorce, failed start-up as well as exaggerated educational cost have on consumer credit in general.
Irresponsible lending or borrowing?
For thousands of years it was assumed that usurious lending practices, high interest, exploitation of needy situations etc. played a major role in the injustice inherent in the fact that money alone created money. Rich people used their power to exploit the poor – not only in capitalism. The state and in many instances God was seen in charge to limit this. We find these rules still present in national law as revealed by our study on Usury Legislation for the EU-Commission.
While the EU and many national legislators and jurisprudence made use of these experiences in the last 20 years of the last century the neo-liberal wave in Brussels led to the 2008 and 2014 Credit Directives which provided information instead of protection. In Brussels and elsewhere the consumer was blamed, named and shamed for bad credit. This credit had in the US (Subprime Crisis), the UK, Spain and more hidden in the other EU-member states destabilized the whole monetary system. G20 found that irresponsilbly lending banks had taken states and taxpayers hostage. Today it is no longer attributed to those irresponsible products, usury, risk-based pricing etc. which led to the crisis. It is now again attributed to consumer behavior. They are too been stupid, inexperienced, irresponsible, hazardous, childish, greedy etc. for consumer credit. It was retrospectively a crisis of bad consumer habits. Banks became legally the custodians of consumer behaviour. They should single out credit unworthy clients, educate them, punish and admonish.
This is underpinned by biased research. While the EU of the 1990ties still financed impartial research on the reasons of overindebtedness and treated this issue in its consumer protection department the neo-liberal wave put the problem to the totally incompetent social policy department which in fact showed the banking deparment as the winner. Support of research which could have led to critic of bank behaviour ceased. Usurious practices as shown expecially by for example Santander, Targo and Citibank have been omitted in statistics. They are thus objective, innocent, independent – and thus mere political nonsense.
It is not by chance that the banking industry finances “independent research” on consumer credit all over the world. Purdue University in the US put CUNY out of work, Personal Finance Research Center replaced PSI in the UK, the Savings Institute in Paris replaced the INC research group in Paris and the European Credit Research Institute (ECRI) took the place of the Centre de droit de la Consommation in Louvain-La-Neuve as well as of iff in Hamburg. ECRI is also linked to its mother company CEPS which again shows a domination of banks. EU-Commission and Members of the Parliament are close allies.
Their credit data are derived from bank lending. Forms, origin, prices and target groups of credit and debt are omitted. We can nothing learn about the marketing, the banks who create most insolvent consumers, nothing about how much of the debt stemmed from debt collection fees, refinancing damage or payment protection insurance. The data suggest that overindebtedness is an unforeseeable hurricane in which only the victims can try to escape by leaving their home just in time. Systemic usury just as global warming is no issue in the analysis.
The financial institutions listed as corporate members of CEPS and ECRI as well as its Board of Directors involved represents that in public they manage a perfectly organized lobbyist disguise. Even Wikipedia follows their self-evaluation. Also the Commission confines them with research grants, its members appear as speakers at their events even if the consumer side is absent. The only competitors seem to be consulting companies used to play the tune for those who pay them.
After the EU-Commission stopped their own consumer conferences they seem to welcome these events just as even consumer related institutions like Finance Watch and university researchers who have no own funds. The agenda is to focus on consumers instead of banks and their products. The more this is diversified and intensified people recognize that as Berthold Brecht put it and Max Frisch cited it “that in our days speaking about trees is a crime because it includes remaining tacit on other problems of society”.
Consumer Credit and Mortgage Directives under scrutiny
The new ECRI/CEPS activities come just in time to guarantee that the Commission can do the pending evaluation of the neo-liberal Credit Directives without intervention of critical science. Already the 2013 evaluation report had been delayed because the Commission found that the only application had been too biased towards consumer protection so that they renewed the tender. In the 2018 evaluation five market-research companies have been pre-selected and the task is narrowed down to problems that arise from consumers and not from banks. Everything has been done to keep in line. It would be easier the Commission gave the evaluation directly to ECRI.
With this structure we can be sure that the EU and its Directives represent what people fear: a market institution which protects financial agglomerations against its users, political influence and scientific insight into what they socially achieve.
ECRI and CEPS promulgate a consumer driven approach which leaves the driving forces for overindebtedness basically unmentioned. On the other side iff has a collection of data out of the use of their debt advice programs from 80.000 overindebted household each with a 1000 data refreshed every year. Debt advisors would be happy to furnish research with data on banks, debt collection agencies, products and their relation to insolvency. Its significance has been proved in many instances. But while still before 2000 the Commission supported such computerized debt device which would generate the necessary data Brussels has given up all efforts in this respect and looked into (insignificant) financial literacy and micro-lending schemes. We have extensively described this deviation from sociological research to the ideological construction of non-problems with sham solutions.
 ACI Worldwide; American Express; BNP Paribas Personal Finance; Cofidis; Crédit Agricole Consumer Finance; ING; International Personal Finance; Provident Financial Group; Schufa; VISA; ABBL; DLA Piper; Sparda-Bank