Over-Indebtedness: “Contrary to What the Advertisements Say, There is a Cost to Consumer Credit”

Lifestyle Finance
Matthieu Robin, bank-insurance project manager at UFC-Que Choisir, sounds the alarm on the risks of over-indebtedness

INTERVIEW: Matthieu Robin, bank-insurance project manager at UFC-Que Choisir, sounds the alarm on the risks of over-indebtedness

  • The consumer association UFC-Que Choisir launches an alert on “the irresponsible distribution of consumer credit”, faced with an expected increase in 2021 in defaults on consumer credit.
  • It also points to the role of “push-to-crime” advertisements from credit institutions, which make consumers forget the cost of consumer credit.
  • The association calls on consumers to be cautious and puts online a series of tools to prevent over-indebtedness.

Consume now, pay off later. This Wednesday, the UFC-Que Choisir launches an alert on consumer credit , which broke subscription records this year. With the approach of the holidays, an important item of expenditure, the association for the defense of consumers asks Europe to force banks to offer solutions in the event of a payment default.

In the midst of a period of crisis and uncertainties, these unpaid maturities could reach 12 billion euros in 2021 and put many consumers in difficulty. Interviewed, the author of the study Matthieu Robin, bank-insurance project manager at UFC-Que Choisir.

What observation did you make when looking at the subject of consumer loans?

When we look at the figures at the end of 2019, only 30% of loans in default of payment are subject to adjustments by the banks. A pause in the maturities, an extension of the repayment period or a drop in the interest rate… Solutions exist but very few banks offer them because they are not obliged to do so. This mismanagement of unpaid debts has very serious consequences for consumers, who see their situation deteriorate even further, and sometimes even have to take out new credit to pay the costs.

We also notice that there is a real backlash of “push-to-crime” advertising, as at Sofinco, which tells you: “Pay off after the holidays”, or “roll-up now and pay in six months. »At Toyota Financement. They present the credits as painless while they increase the amount spent, and that obviously everything must be repaid.

What is important is to treat the evil at its root: better manage these unpaid debts, by forcing banks to present credit arrangements after two deadlines, and moralize these irresponsible advertising.

What are the risks incurred by consumers who use consumer credit?

In the short term, the risk is to think that a loan will be painless. Contrary to what advertisements suggest, there is a cost to consumer credit. This should not be forgotten, particularly in view of the uncertainties hanging over the economic situation. Maybe people will go back to short-time work in the coming months, for example. Historically, there is a very strong link between the unemployment rate and over-indebtedness, which raises fears of a very significant rise in delinquency rates, and more difficulties for borrowers.

In addition, we know that consumer credit is very risky when it is poorly distributed. And we see that it is very different depending on the bank. For example, there are more unpaid bills at BNP Paribas than at Crédit Mutuel. This may suggest that there is a lack of vigilance in lending practices.

How to avoid putting yourself in a difficult situation? Should we stop taking out these credits?

Consumer credit can obviously be useful when a washing machine breaks down and you don’t have the funds to buy a new one, but you have to think before taking it out. First of all, one of the best practices is to have competition between lending institutions before buying a product. You can go see his bank, which knows you, and which will certainly offer you better rates than a consumer credit in the store.

What tools have you put in place at UFC-Que Choisir for these consumers?

On the one hand, we provide them with a decryption of the regulations that exist today but which are complex. We also put online a standard letter  to request a reorganization of credit. Finally, we invite them to get closer to our network of local associations, present in the territory, which helps consumers face these reimbursement difficulties

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