Coordinating the Network of EU Agencies 2015 Innovative tools to curb household over-indebtedness CEPS & ECRI Conference “Over-indebtedness of European households: myths and realities” Session 3 Brussels, 26 January 2016 Hans Dubois, Eurofound

Coordinating the Network of EU Agencies 2015 Holistic policy response Persisting problems (cross-country & in-time): unrealistic to prevent altogether. 1.Prevention – education, regulation (e.g. good credit registers), early-warning systems 2.Alleviation – debt advice & other services – communication creditors-debtors (payment plans) 3.Rehabilitation – Bankruptcy or legal settlement (leading to real rehabilitation, with limited memory of credit registers) – If period on min income: not too short & not too long stimulus to maximise earnings during agreed pay-off period Source: Eurofound (2012) Household debt advisory services in the European Union,

Coordinating the Network of EU Agencies 2015 Debt advice plays an important role, but also other actors (NGO/publicly funded) Key: effective ‘diagnosis’ to not only address symptoms & referral (training of staff is important) Beyond debt advice… – Social services – Housing policies (facilitating transfer to a more affordable dwelling/ reducing utility costs) – Health services – Employment services – Accessible legal advice – Consumer support services – Relief organisations – Effective and efficient social benefit systems

Coordinating the Network of EU Agencies 2015 Reducing ‘non-take-up’ FAWOS (Vienna): receives contact details of people who are likely to be evicted, from the court. 40% is solved by enforcing entitlements! Many people in the EU do not receive the social benefits they are entitled to according to national regulations Eurofound found evidence in 16 Member States, for at least 1 type of benefit, 1/3 of people entitled do not receive it; probably similar in other Members States – Financial assistance to pay for private health insurance in France (53-67%, 2011) – Child benefit in Bulgaria (34-39%, 2007) – Social Assistance in Finland (55%, 2010), Germany (34-43%, 2008), Slovakia (79%, 2009) – Housing benefit in Czech Republic (70%, 2010) – Jobseeker’s Allowance in UK (39%–45%, ) Causes: lack information, complex application, social barriers Many of these people have debt problems, which could be alleviated if benefits reach those entitled

Coordinating the Network of EU Agencies 2015 Debt advice in the EU Beyond the label ‘debt advice’, variation for example according to – presence accessible debt settlement/bankruptcy – nature of problem – how well other policies/services address certain aspects Complex mix of funding and provision & diverse landscape – For example: debt advice in BE is provided by municipalities/NGOs/lawyers, regulated nationally, financed predominantly by Energy Fund (energy bill contributions consumers, implemented by providers) and complementary funding regional government Trends – Crisis more demand: on shoulders of other public services (social workers, primary care) and no matched funding increase and cuts (e.g. NGOs), but also… – increased funding (IE), private initiatives (CZ: Porodna, IE: new beginning) – strengthened role government in debt advice (NL 2012, PT 2012, DK 2010, EE 2005), but: DK: temporary/non-mandatory, and relatively large role private NGOs & volunteer work PT: relatively small role, and large for consumers organisations & for-profit EE: only in capital & few municipalities Gaps (explicit or limited access) – small municipalities not obliged, small debts not always covered (problem: early intervention), or focus on specific debts only (HU) – limited capacity, waiting lists (ES/small municipalities SE) – not for (small) businesses (IE/FR) – fee charging (several in PT) Sources: CIVIC (2015) The over-indebtedness of European households: updated mapping of the situation, nature and causes, effects and initiatives for alleviating its impact – Part 1: Synthesis of Findings; Mainz University’s Debt advice in Europe website, & Eurofound 2012 Household debt advisory services in the European Union.

Coordinating the Network of EU Agencies 2015 Funding debt advice in the EU, 2015 Debt advice in the EU (2015)

Coordinating the Network of EU Agencies 2015 Quality of debt advice services Some diversity (duplication) with various forms of funding – Advantages: reach groups which may have low trust in government (often creditor itself), do not find their way, not reached by limited capacity, or are just more used to contact certain service – Disadvantages: not always able to give best advice, for example large debts & limited enforcement; hard to find way through fragmented system, same cases treated unequally – fairness (FI 2001 reform); funding by 1 financial service provider/for-profit without quality control risky. Regardless of funder/provider, quality & access of services is crucial: – heterogeneity in cases (causes & circumstances): heterogeneous solutions, but similar cases should be treated similarly (training); – broad focus (with adequate referral), often not narrowly administrative; – establish relationships of trust, identify underlying causes & problems; – invite prompt access (e.g. anonymously phone/internet); – knowledge/information on existence, entitlement & how to access; – pro-active systems (triggered by arrears to utility, social housing, social health insurance, telecom, or credit providers), such as ‘Vroeg Eropaf’. Source: updated from Eurofound 2012 Household debt advisory services in the European Union,

Coordinating the Network of EU Agencies 2015 Thank you Hans Dubois