Visuel Etude Impact Crise 2

Act now to prevent over-indebtedness: Impacts of the pandemic on family budgets in France

On 7 May 2020, Prime Minister of France Edouard Philippe expressed himself as follows: “Once the pandemic is over, our country will respond to the economic crisis and the general impoverishment that will come.” In this regard, COFACE’s French member UNAF calls for action to prevent over-indebtedness and impoverishment which threatens many families during and after the confinement. The risk is real. Looking at 2019 when, even before the confinement, 5 million households (11 million people) were already having difficulty making ends meet.

Financial difficulties linked to the health crisis

The families and persons that the UDAF (regional branches of UNAF) accompanied before the start of the lockdown measures have generally seen their difficulties worsen during the confinement. 55% of the households which were monitored saw their monthly expenses increase by an average of 200 €: food budget, digital equipment for the children’s schooling or financial support within the extended family. Only 11% of households saw their expenses decrease.

At the same time, a third of the households already monitored suffered a drop in resources during the confinement. This rate rises to more than 50% among the employed working population. For these households, the financial imbalances resulted in deprivation, unpaid bills and credits, but also projects had to be postponed, banking fees were accumulated and savings were lost or could not be managed.

The economic outlook raises fears that, without public intervention, future shocks could both reinforce the financial difficulties of these families and push further families into poverty and over-indebtedness.

New families will be affected beyond the official poverty categories

The unemployment figures and forecasts for France are particularly worrying. The unemployment rate is expected to rise from 8.5% (2019) to 10.1% (2020), with peaks announced at 13% or even 16% over the course of the year. Redundancies are already being announced in some sectors, and employment prospects are fragile for those who will enter the labour market or who are at the end of short-term contracts.

In the field, the professionals of the UDAF are expecting a rebound effect, i.e. a sharp increase in demand from families with a budget “on a knife edge”. Beyond the necessary economic revival and maintaining employment, it is therefore a massive challenge to prevent poverty and over-indebtedness.

5 proposals to act now to prevent poverty and over-indebtedness

The UNAF/UDAF network will be on the front line to face this wave of financial difficulties, being the main Budget counselling centres (Points conseil budget). However, in order to cope with the scale of the needs, it cannot act alone and without additional resources.

To meet this challenge without waiting for the announced impoverishment of our fellow citizens, UNAF makes 5 proposals, and invites everyone to take their share of responsibility.

  1. Investing additional funds and rapidly launching the deployment throughout the country of  Budget counselling centres => action for the Government
  2. Maintaining a minimum physical reception in each bank and post office branch, in the event of a new episode of containment => action for the banks and post
  3. Granting more flexibility in the processes of paying bills and credits, and managing unpaid bills => action for major creditors (energy suppliers, private social or institutional landlords, credit institutions, etc.)
  4. De-stigmatising the over-indebtedness procedure, and reaffirm that individuals have the right to fail, by renaming it the “debt reduction procedure” => action for the Finance Department and the Banque de France.
  5. Capping the cost of banking incidents (such as accidental overdrafts or debit rejections) for all consumers on a long-term basis => action for Parliament and the Government.

As of May 28, the bill scheduled to be introduced in the Senate on the regulation of banking incident charges should provide a first decisive opportunity to gradually regulate, for all consumers, the mechanism of impoverishment that these charges have been generating for fifteen years now.

In view of the unprecedented scale of the needs and in the perspective of the recovery plan, UNAF calls for a paradigm shift. It is now necessary more than ever to invest in prevention in order to break the cycle that can lead to over-indebtedness.

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