Proposition 50K1730

Projet de loi modifiant la loi du 12 juin 1991 relative au crédit à la consommation.

General information ¶

Submitted by

Groen Open Vld Vooruit PS | SP Ecolo MR Verhofstadt Ⅰ

Submission date

April 11, 2002

Official page

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Status

Adopted

Requirement

Simple

Subjects

consumer protection consumer credit indebtedness

Voting ¶

Voted to adopt

Groen Ecolo LE PS | SP Open Vld MR

Abstained from voting

CD&V FN VB

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Discussion ¶

Dec. 5, 2002 | Plenary session (Chamber of representatives)

Full source

Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker, Mr. Speaker,

This project on consumer credit was drafted after consultation with the Consumer Council and the various stakeholders concerned. What does this bill contain? A first major innovation is the limitation of certain permitted forms of credit advertising. There will be forms of advertising that will now be banned. These include advertisements that encourage the consumer to open a credit while he has debts he cannot cope with, advertisements that mislead the ease and speed with which a credit can be obtained, and advertisements that mislead the aggregation of credits. Similarly, an advertisement must mention the service that is financed, must also announce that the overall annual effective rate is zero; the price of the provision of financial service requested to the consumer who pays by credit must be the same as the price for the consumer who buys by paying by cash.

Another aspect of the reform is the reform of the loan offer. In the enforcement of current law, it is rare for consumers to use the ease of comparing credit offers to be able to choose the best offer or the one that suits them best. It happens as often as people, through contact with different lenders, eventually sign or engage in several credits at the same time, which further strengthens the overindebtedness of these people. In this new bill, the pre-offering system is removed and replaced by a prospectus providing the necessary information. This allows the consumer to collect the prospectus and then make their choice without being tempted to sign prior offers.

The credit agreement shall contain an amortization table indicating the breakdown of each periodic repayment into amortizing capital and total cost of the credit, as well as the indication of the remaining balance due after each payment. In the event of an adjustment of the overall annual effective rate, a new depreciation table shall be provided to the consumer free of charge. The same measures are necessary when it exercises its right of termination. A third aspect is that this bill introduces a generalized period of reflection. This project also involves greater accountability of credit intermediaries. It is therefore appropriate to require the credit intermediary to make a first assessment of the consumer’s solvency. Remember, we have already voted for the creation of the positive credit central which adds to the credit central for bad payers and which obliges credit agencies to inquire about the guarantees that the consumer will have the ability to repay a loan they would grant him. This obligation is therefore restored.

Furthermore, the law allowed variability of the agreed rate only for credit opening. This draft authorizes the inclusion of a contractual clause of variability of rates for operations with a temperament of more than 5 years. This measure aims to reduce the risk inherent in long-term contracts. The variability will have to comply with the rules for mortgage loans.

This project also addresses the problem of insurance "sold remaining due". Too often, for the time being, the granting of the credit is subject to the conclusion with such a company, and often, through the channel of such an intermediary, of an insurance of the type "balance remaining due". These insurance contracts provide very high additional income for both the lender and its intermediaries. It is generally impossible to distinguish between insurance freely and voluntarily subscribed by the borrower and insurance imposed as a condition for granting the credit. The proposed solution to combat inadmissible abuses occurring on this occasion is therefore to provide that the costs related to this insurance cannot be claimed separately from the borrower. They must be included in the total cost of the loan.

The project also focuses on resignations. When the contract is terminated or when it ends and the consumer has not performed, after sending a recommended letter containing a notice for non-compliance with the rules, no payment other than those mentioned below can be claimed from the consumer. The only payments are therefore: - the payment of the expired and unpaid capital, - the amount of the total cost of the expired and unpaid credit, - the amount of the agreed delay interest, calculated on the expired and unpaid capital, - the penalties and compensations agreed within the limits and ceilings that are also defined in this project.

Rapid and effective penalties are also provided for in the event of non-compliance by the lender with its obligations of informing the consumer.

An important and interesting measure relates to cautions. For contracts with indefinite duration, it is now proposed that the guarantee is only valid for a period of 5 years, renewable with the express agreement of the guarantee. Indirectly, for indefinite-term credit contracts, lenders will have to conduct a new examination of the borrower’s solvency. When granting a credit, the assessment of the applicant’s solvency must therefore be based on the applicant’s financial situation and not on the personal collateral attached. Other measures relate to distance credit contracts. Here, the interesting innovation is that it will now be allowed to deliver the ordered product even before there is signature of the contract. Another aspect is the zero reduction for indefinite or fixed-term contracts of more than five years that do not provide for periodic capital repayment. These contracts are unanimously considered to favour a permanent debt since the capital debt is not amortised and persists in its entirety permanently. Moreover, the less aware consumers, who are generally the ones who suffer the most from over-debt, do not realize their situation since, each month, they make their payment. So, for them, they repay while in reality, this monthly amount represents only the debtor interest calculated on the credit taken.

Another measure because it is a very complex and very long project: it is the strengthening of provisions on the opening of loans. In order to better inform the consumer about the actual cost and the functioning of credit opening contracts, statements should be included in the monthly report and those statements should be better specified. The problem of exceeding the contractually agreed amount of credit is also resolved in this project. We also discuss the approval of institutions. For now, in the current law, the Commercial Court has been designated to hear appeals against a ministerial decision in case of refusal, withdrawal or suspension of approvals and inscriptions. This was done to deviate from the principle of appeal before the State Council by saying that it would be more effective, but practice shows that in fact, the effectiveness is not greater and the experience is not convincing. Therefore, the role of the Council of State is restored.

It is interesting to know that this law will come into force with effect on claims that are already in progress, except for certain articles that cannot be applied in this way and that no later than three years after the publication of this law in the Belgian Moniteur, the parties, whether the lender or borrower, will be required to adapt their credit contracts to the new legislation, in any case for indefinite credits. The consumer and the caution shall be informed of the changes by the lender.

I didn’t go into all the details but I still wanted to explain the basis and interest of this project in order to improve consumer information and combat over-indebtedness.

How was the project voted?

I think everyone was in favour of this project. I have nothing to do with myself. I was told there were abstentions.

This information is usually given at the end of a report. But I understand, no matter the outcome of the vote, that he was voted, otherwise he would not be here.

I will tell you that it was voted by a large majority but the content seemed to me more important.

Mr. Speaker, Mr. Minister, colleagues, the bill we are discussing now aims to make improvements to the Consumer Credit Act of 12 June 1991. It is the intention of the government to be able to prevent the excessive debt burden of individuals. The amendments to the draft law are numerous and many adjustments are of a technical nature. The proposed bill has gone a long way. At the end of 1995, a review of the law of 1991 was initiated. The Council of Ministers of 30 April 1997 dedicated to the fight against poverty commissioned the then Minister of Economy, Mr. Elio Di Rupo, to submit a draft law. The draft law was submitted to the State Council for opinion on 11 May 1999. This was done by the previous government. The State Council issued an opinion on 27 January 2000. Only now, on 11 April 2002, the text was submitted to Parliament. This was two years after the opinion of the State Council. Apparently, this government was not in such a hurry.

The philosophy of the 1991 Act is to increase market transparency and prevent excessive debt burden on consumers. This philosophy is preserved. The pre-design as it was drafted by the previous government has actually not changed so much, Mr. Minister. That is the weakness of this project. The reality of the debt problem has been thoroughly evaluated.

To understand the seriousness of the matter and to know exactly what it is about when we talk about debt loss, it is still good to base ourselves on numbers and to look at a number of figures. You know that we have a negative credit central where therefore there is registration of repayment delay. At the end of 2001, there were 397,451 people registered in the negative central. These totaled 541.518 contracts. Of these contracts, 84% are unregulated. That is, at 84% of these more than 300,000, almost 400,000 people the repayment delay was not cleared. The total amount in default is EUR 1.8 billion, or on average more than EUR 4000 per contract. Of the population over 18 years of age, 4.9% is registered in the negative power plant. In 1996 this amounted to 4.5%. The debt loss rate is the highest in the age group between 25 and 44 years. It is also higher in Wallonia and in Brussels. The growth of new persons registered in the negative plant has increased significantly, especially in 2000 and 2001. From 1994 to 1999 there were 3000 to 7000 new registered persons per year, in 2000 there were more than 10,000 new registered persons, in 2001 almost 12,000.

Approximately 80% of the increase in defaults in 2001 relates to consumer loans that are closed in the form of a credit opening. Since it is good to know exactly where those backstations are situated, I would like to continue on that. A credit opening is a very flexible formula for a consumer. That formula is offered by lenders as financing companies, wholesale store chains, postal order companies, and so on. In 1997, there were 99,530 credit openings in default. At the end of 2001, there were 169,345, or 70% more. This increase will continue in 2002. It is strange, because, on the other hand, the defaults in loans on repayments, sales on repayments and mortgage loans barely increase compared to 1997. The growth in the number of unregulated credit opening in non-credit institutions has ⁇ tripled in the last five years. What is the problem? The problem is not the default in loan on repayment, sale or repayment or mortgage loans, but the credit opening for consumer credit in non-credit institutions.

Then the question is what the government is doing about this problem, the consumer credit, the delays in consumer credit openings. What does the design do? Hardly anything. We also heard in the committee the VZW Self-Help Group Debtoverlast. This group looks at the problem from the point of view of the weak consumer and from the point of view of those who have fallen into misery, among other things, due to consumer credit. The VZW complains that the present draft does too little to prevent people from falling into a situation of debt loss.

We decided to abstain in the vote. We believe that the provisions of the draft constitute an improvement compared to the current legislation. In itself, there is nothing to be noticed. At the same time, however, we note that the design has continued to face the problems as they presented themselves four years ago. The draft has nothing to do with the problem of credit opening. This is the new problem of debt degradation that occurs today. The government adopts a bill from four years ago and does not adapt the text to the current problem.

During the discussion, we also advocated for a more radical intervention in publicity for loans. Colleagues, the core of the problem lies also in the advertising of consumer credit. A more radical intervention was not feasible. The majority was not willing to intervene. Well, if we do not address the advertisement, then the sewing with the crane remains open. I hope that the government and the scientific community will conduct a thorough investigation to see how we can transform the legislation into an effective tool to protect people from debt loss. A stricter law, of course, does not compromise every loan provision. We also know that there are a lot of loans that are repaid. Unfortunately, for the large group of people who are troubled by credit opening, consumer credit and consumer credit advertising, the design is too little ambitious. Therefore, our group will abstain from voting on the draft.

Mr. Speaker, Mr. Minister, colleagues, when Parliament passed the Consumer Credit Act in 1991, that responded to a need. The previously applicable credit legislation dates back to 1957 and was no longer adapted to the evolution of the market. Let’s just think of the strong rise of credit opening. Importantly, in 1991, in addition to the desire to somewhat organize the market in credit to individuals, consumer protection against debt loss was a prominent option.

We note that the current amendments to the Act of 1991 introduced by the present draft act respect and even reinforce the latter’s objective, namely protection against debt loss. It is essential for our group. Many families in our country are facing debt problems. Aid providers note that a large part of that debt burden originates in loans. If we see that in September of this year 364,231 persons with late payments on consumer credit were registered, we can only conclude that there is still a lot of work to be done in the field of debt prevention on credit. Also the latest yearbook of Vranken in connection with poverty in our country points to the increase of debt problem among many young people aged -25 and among the elderly population.

We realize, of course, that the present draft itself will not be sufficient to solve the problem of debt overload. That solution, by the way, we will never ⁇ by merely legislative work but the bill has a number of instruments and therefore deserves our full support. It can also count on the same support from all consumer organisations.

For example, it is given that many loans are made through a credit intermediary. It is not more than normal that the responsibility of that mediator is now clearly defined. And rightly, the draft obliges the intermediary from now on to conduct an initial solvency study. Furthermore, credit splitting is now explicitly referred to as a prohibited technique.

Furthermore, we note that the prior delivery of a loan offer, which was to allow the consumer to compare different formulas with each other, has not worked in practice, as it is usually signed quite quickly and too quickly. It is therefore very important that instead the reflection period is almost generalized. We therefore think that it is indeed desirable that the consumer can come back to sometimes impulsive decisions.

We are pleased that the design also takes into account some of our own aspirations. The design has also been adjusted in that sense. This is mainly related to credit advertising. In various publications, especially in advertising leaflets, we see ads that are clearly aimed at attracting people with money problems. In this, the advertisers emphasize, among other things, how quickly the consumer can get the necessary money. “Decision in 20 minutes,” we read among other things. This is very attractive for people who are in an acute need of money. Payment difficulties appear to be no obstacle to some lenders. I quote from an advertisement: "Even if on the blacklist, or wage seizure, or multiple loans ongoing, or delayed payments, debts or heavy payments, still credit possible with us". Until then the quote. The centralization of debt is also often encouraged, while that does not provide a solution for the consumer.

I quote: "We centralize all your loans and long-term loans." These kinds of things can not be for us by the beugle. We are therefore very pleased that we have been able to sharpen the text at the point of laxable advertising practices. Advertising that encourages the consumer with debt problems to take credit, or that unlawfully emphasizes the ease or speed of the credit provision, or encourages the restructuring or centralization of credit.

Furthermore, it is also possible to request payment facilities from the peacekeeper when the consumer’s financial situation deteriorates. These provisions from '91 can be a useful way out for consumers who have a debt burden that originates solely or largely in consumer credit and for whom the collective debt settlement would be a too heavy procedure. At our request, the access to the procedure through the peace court to obtaining payment facilities was therefore further eased on several points. That is a good thing. These and many other changes increase the preventive gap in debt loss. Our group will therefore with great pleasure support this draft and insist that its compliance is effectively enforced.

Mr. Speaker, I do not think it is necessary that I intervene long in this debate since what has been said in this tribune has already been discussed in a committee and I would gladly refer to the report. I will, however, bear in mind that men of action van de regering op this gebied as one whole must consider. In addition to this law we have other initiative genome om enige coherentie aan onze strijd tegen overmatige schuldenlast te geven. Therefore, I think, Mr. Speaker, that I can refer to the report in general.