On the 5th and 6th of February, DG FISMA of the European Commission hosted the 4th meeting of the newly appointed Financial Services User Group (FSUG). Several topics of interest for European citizens and families were discussed, especially key points of the DG FISMA Consumer financial services action plan.
- On Action 7b related to debt advice, COFACE Families Europe underlined the necessity to focus also on insolvency laws and not just “advice” to over-indebted consumers. Without functional insolvency laws, no amount of advice will be able to help severely over-indebted consumers.
- On Action 9 related to better creditworthiness assessments, COFACE Families Europe reiterated its position on the data necessary for carrying out a fair and proportional creditworthiness assessment. The core principle relies on focusing on the financial management skills of the consumer (level of savings and budgetary management) as opposed to the history of successfully reimbursed loans.
- On Action 11 related to digital identity checks, COFACE Families Europe shared expertise about using blockchain technology and multiple key signatures to allow for reliable digital identity checks which simultaneously respect people’s privacy and data protection.
Finally, COFACE Families Europe strongly criticized the European Commission’s initiative on creating a secondary market for non-performing loans. To put it in blunt terms, non-performing loans (loans on which consumers have defaulted and stopped paying) are a problem on the balance sheets of banks and the EU Commission has been looking for a way to remove them. Creating a secondary market for non-performing loans would allow banks to sell their non-performing loans to “investors” (in many cases unscrupulous, and often aggressive, debt collectors) at a steep discount: around 80% or even 90%. In concrete terms, this would mean that a loan of 50.000€ that a consumer is unable to repay could be “resold” to a third party for 5000€! Then, any amount in excess of 5000€ “squeezed out” of the over-indebted consumer would represent a net profit for that third party. COFACE Families Europe would have recommended that these discounts would first be proposed to the over-indebted consumers themselves! Of course, this would be subject to certain conditions to avoid moral hazard.