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  • Abstract IGLRC 2015

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    This paper examines how European private law can prevent over-indebtedness of consumers, particularly with mortgages. It argues that private law tools can help address over-indebtedness caused not just by a lack of information but also financial disasters. The paper looks at how the EU's goal of financial inclusion may expose more consumers to risks of over-indebtedness during financial crises. It analyzes defining risk factors and financial disasters to see how their possibility could be incorporated into mortgage agreements to improve regulations preventing over-indebtedness.

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    This paper examines how European private law can prevent over-indebtedness of consumers, particularly with mortgages. It argues that private law tools can help address over-indebtedness caused not just by a lack of information but also financial disasters. The paper looks at how the EU's goal of financial inclusion may expose more consumers to risks of over-indebtedness during financial crises. It analyzes defining risk factors and financial disasters to see how their possibility could be incorporated into mortgage agreements to improve regulations preventing over-indebtedness.

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    12 views1 page

    Abstract IGLRC 2015

    Uploaded by

    IrinaDom
    This paper examines how European private law can prevent over-indebtedness of consumers, particularly with mortgages. It argues that private law tools can help address over-indebtedness caused not just by a lack of information but also financial disasters. The paper looks at how the EU's goal of financial inclusion may expose more consumers to risks of over-indebtedness during financial crises. It analyzes defining risk factors and financial disasters to see how their possibility could be incorporated into mortgage agreements to improve regulations preventing over-indebtedness.

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    © All Rights Reserved
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    From financial inclusion to the prevention of over-indebtedness through European private law

    Irina Domurath, Ph.D. Fellow University of Copenhagen


    Abstract for IGLRC 2015, Kings College, London
    This paper examines the prevention of over-indebtedness through European private law, with a focus on
    consumer mortgages. After an examination of the causal mechanism that can lead to over-indebtedness, it
    claims that private law tools can serve to prevent over-indebtedness of European consumers. While the
    overwhelming part of the literature and policy initiatives in the field of consumer law since the financial crisis
    has focused on a narrower set of risk factors for over-indebtedness such as a lack of information, toxic
    products, or over-commitment of consumers, this paper pays special attention to one important, albeit
    neglected, cause of over-indebtedness, namely the occurrence of financial disasters.
    Drawing on the literature on the political economy of the EU, the paper is based on the observation that the EU
    policy goal of financial inclusion exposes a wider range of consumers to the financial market. While the
    consequential rising levels of indebtedness might be unproblematic in times of financial stability, empirical
    evidence suggests that the risk of over-indebtedness rises when financial crises occur. If financial crises are
    considered an inherent part of the modern financial system, it must also be debated whether financial
    inclusion, as such, exposes consumers to an increased risk of over-indebtedness.
    In order to suggest specific private law tools that could protect from over-indebtedness through financial
    inclusion and financial disasters, special attention is paid to the definition of risk factors and financial disasters.
    It is analyzed to what extent the possibility of the latter irregularities from the viewpoint of the contractual
    relation between lender and borrower can be incorporated into consumer mortgage credit agreements with
    regard to an improved regulatory framework for the prevention of over-indebtedness.

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