Abstract
The loss of jobs and the decline in real incomes caused by the 2008 financial crisis and the COVID-19 pandemic have affected consumers’ ability to repay their debts. These have led to high ratios of non-performing loans (NPLs), which affect the stability of the financial industry and undermine economic recovery. The result has been a need for faster debt enforcement and a drastic increase in abusive informal debt collection practices (IDCPs). In the EU, the need to regulate and harmonize abusive IDCPs surfaced in 2018 in connection to the Proposal for a Directive on Credit Servicers, Credit Purchasers and the Recovery of Collateral (CSDP). The directive would enable banks to outsource the servicing of NPLs to a specialized debt collector, but it contained no protection rules against abusive IDCPs. In this article, the researcher critically assesses the need for harmonization of the legal framework concerning abusive IDCPs in the EU, mainly from the standpoint of the initial and current text of the CSDP. Where necessary, the researcher will refer to both historical and comparative law perspectives. The researcher focuses on the legal character of informal debt collection, its relation to financial services, and its potential sui generis character. After that, the researcher will address the arguments for and against establishing pan-EU sector-specific legislation dedicated to IDCPs. Next, the researcher discusses the constitutional authority of the EU to regulate abusive IDCPs. Finally, the researcher will examine the interaction of the CSDP with other consumer (financial) protection instruments to identify the best solution for harmonizing abusive IDCPs at the EU level. The researcher will juxtapose several dichotomies: general versus sector-specific, procedural versus substantive, minimum versus maximum harmonization, and hard versus soft regulation. In the conclusion, the researcher shall synthesize the core problems and suggest an approach.
Highlights
The emergence of the credit card made personal credit more accessible by removing the need for collateral (Geisst, 2013) and caused several critical transformations of the financial business
These differences reveal that debt collection has a rather distinct nature and varies in coverage depending on both the active subject and the passive one
The current concern of informal debt collection laws for the consumer’s privacy, psychological well-being, and protection from egregious practices stands in stark contrast with what was acceptable several decades ago or with the neoliberal concept of the self-reliant and fully responsible consumer
Summary
In the AG’s view, a debt collection agency providing such services would qualify as a credit intermediary under CCD, a position similar to that of the Federal Court of Australia To justify her interpretation, the AG juxtaposed the legal provisions with the case’s facts. The court avoids providing a clear answer to whether debt collection is a financial service It states that “ a debt collection agency [...] does not provide the consumer with a consumer credit service as such, the fact remains that the activity [...] falls under the concept of commercial practices” (Para 25) (emphasis added). The CSDP proposes another way of looking at the problem: Debt collection is neither a proper nor a quasi-financial service Instead, it is a specific service (e.g., the recovery and renegotiation of debts) linked to a particular financial product (e.g., consumer credit agreements). Both the CCD and the Directive 2014/17 on consumer agreements relating to residential immovable property (CMD) exclude a wide variety of transactions from their scope, which would enable them to escape compliance with the CSDP’s requirements
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