A Tale of Two Debtors: Responding to the Shock of Over‐Indebtedness in France and England – a Story from the Trente Piteuses
| DOI | http://doi.org/10.1111/j.1468-2230.2012.00897.x |
| Published date | 01 March 2012 |
| Date | 01 March 2012 |
| Author | Iain Ramsay |
ATale of Two Debtors: Responding to the Shock of
Over-Indebtedness in France and England – a Story from
the Trente Piteuses
Iain Ramsay*
England and France have developeddistinct treatment systems to address the shock of a substantial
increase in over-indebted individuals since the mid-1980s.In France, Over-Indebtedness Com-
missions, with the Bank of France playing a central role in their management, now dominate the
system. A more fragmented system of private and public providers of remedies developed in
England, with innovation driven by private actors modifying existing commercial procedures and
increased access to bankruptcy relief a side-effect of government promotion of entrepreneurialism.
This article explains the differences between these countries in terms of the influence of interest
groups, including state actors,and ideologies. Historical contingency also plays a role.The distinct
responses were not hard-wiredto legal or igins and the article argues that analysis of the interaction
of interest groups, state actors and ideology in shaping institutions,which in turn structure future
change, provides a productive approach for future comparative research in this area.
‘Over-indebtedness of consumers, these terms would have been surprising
twenty years ago, even ten years.Yet in a decade, debt has emerged as a social
phenomenon, often even a drama’.1
INTRODUCTION
The period since the late 1970s has been remarkable in the international changes
in capitalism, the world of work and the family. This article is about how two
European countries dealt with one consequence of these changes, the growth
of over-indebtedness. It discusses how England and France, with distinct legal
origins, developed treatment systems to address the shock of a substantial in-
crease in over-indebted individuals since the mid-1980s.2Over-indebtedness3is a
*Professor of Law, Kent Law School, University of Kent.I would like to thank officials at the Bank of
France and representativesof French financial and consumer organizations for providing information on
the operation of the Over-Indebtedness Commissions.Thanks also to Alain Chatriot,Sophie Vigneron,
Toni Williams and two anonymous reviewers for comments.
1 L. Bihl,‘Le surendettement: apparition d’un fléau social’ in M. Gardaz (ed),Le surendettement des
particuliers (Paris: Anthropos, 1997) quoted in A. Chatriot, ‘Protéger le consommateur contre
lui-même: la régulation du crédit à la consommation’ (2006) Vingtième siècle Revue d’histoire 95.
2 Data documenting the increase in formal measures of over-indebtedness are available for
France in the National Statistics on the Activities of Over-indebtedness Commissions 1990–
2009 at http://www.banque-france.fr/fr/instit/telechar/protection_consommateur/statistiques-
surendettement.pdf (last visited 30 November 2011).Applications to the over-indebtedness com-
missions have increasedfrom a rate of 1.6 per thousand capita in 1991 to 3.4 per thousand capita in
2010. For England and Wales see Insolvency Service statistics http://www.insolvencydirect.
bis.gov.uk/otherinfor mation/statistics/insolvency-statistics.htm (last accessed 9August 2011) and
see below discussion of England andWales at 235 et seq.
3 There is substantial discussion on appropriate measures for defining and measuring over-
indebtedness.See, eg,National Audit Office,Helping Over-Indebted Consumers (London:Comptroller
© 2012The Author.The Modern Law Review © 2012 The Modern Law ReviewLimited. (2012) 75(2) MLR 212–248
Published by BlackwellPublishing, 9600 Garsington Road, Oxford OX42DQ, UK and 350 Main Street, Malden,MA 02148, USA
significant social and economic issue in both countries, disproportionately affect-
ing lower income groups4and women5. Recent official reports in both countries
have questioned the effectiveness of existing over-indebtedness strategies.6
In 1989 France adopted a unique institutional approach to the treatment
of over-indebtedness.7Over-indebtedness commissions were created in each
département comprised originally of representatives of the public administra-
tion, an employee of the Bank of France as secretary, and one representative
of consumer groups and financial institutions.8Individuals unable to pay their
non-professional debts9could apply to the Commission which would conciliate
a plan with their creditors to repay their debts. Application to court could be
triggered by a failure of conciliation.The Bank of France played a central role in
the establishment and management of the commissions – a ‘totally unique’ role
for a central bank10.This regime was modified in 1995, 1998, 2003, 2007 and
2010.As a consequence of these reforms the Commissions rather than the courts
now dominate the French system, providing a free ‘one-stop shop’ for debtors
seeking debt relief which ranges from moratoria and rescheduling to the pos-
sibility of a discharge of debts, introduced in 2003.11
England and Wales developed a more fragmented mixture of public and
private providers of advice and treatment of over-indebtedness with much
and Auditor General,2010); The European Commission, Towards a Common Operational European
Definition of Over-Indebtedness (Brussels: DG Employment,Social Affairs and Equal Opportunities,
2008); Oxera Consulting,‘Are UK households over-indebted?’ Report preparedfor APACS,BBA,
FLA, CCA (2004).
4 The Gr iffiths Commission on Personal Debt, What Price Credit? (2005) at i ‘disproportionately
affects low income families, lone parents .. .’ In France see G. Gloukoviezoff, L’Exclusion Bancaire
(Paris: Presses Universitaire, 2010) 222 et seq, see below reports of Bank of France on profile of
over-indebted at 224.Bertrand Bissuel, ‘Le surendettement se propage parmi les ménages les plus
démunis’ Le Monde 2 August 2011.
5 DTI,DWP, Tackling Over-Indebtedness (Annual Report,2005) 22: ‘Women are over-represented on
all types of over-indebtedness indicators’.Statistics on the use of debt relief orders (see infra at 241)
indicate a significant over-representation of women. See also T. Sullivan, E. Warren and J.
Westbrook, The Fragile Middle Class:Amer icans in Debt (New Haven:Yale, 2000) 36–38.
6 See,eg, Cour des Comptes, (similar to UK NationalAudit Office), La lutte contre le surendettement
des particuliers; une politique publique incomplète et insuffisament pilotée (Paris, 2010); National Audit
Office, n 3 above. Public Accounts Committee, Helping Over-indebted consumers (HC, Public
Accounts Committee, 2010)
7 Loi n°89–1010 du 31 décembre 1989 relative à la prévention et au règlement des difficultés liées
au surendettement des particuliers et des familles.The current provisions are now located in Book
III,Title III of the Code de la Consommation. For official background see L. Lamier, Projet de la
loi relatif à la prévention et au règlement des difficultés liées à l’endettement des particuliers Avis no 43
(1989–90); J. Simonin, Rapport no 40. Commission des Affaires Économiques (Paris, 1989–90); For a
general analysis of French developments, see J. Kilborn,‘La Responsabilisation de L’Économie:
What the United States Can Learn From the New French Law on Consumer Overindebtedness’
(2004–05) 26 Michigan Journal of Int’l law 619.
8 Code de la Consommation,L331-1. See section headed‘The Role of the Commissions’ below, for
discussion of the contemporary composition of the Commission which includes a lawyer and
social worker.
9 L330-1 defines over-indebtedness as the ‘clear impossibility of a debtor in good faith to address his
non-professional debts due and coming due’.
10 See Cour des Comptes, n 6 above, 482.
11 Under the ‘rétablissement personnel’ procedure which is now defined as the impossibility of
putting in place a repayment plan including a partial write down of debts over eight years. L330-1.
Iain Ramsay
© 2012 TheAuthor.The Moder n Law Review© 2012 The Modern Law Review Limited. 213
(2012) 75(2) MLR 212–248
innovation being driven by private actors modifying commercial procedures
to create repayment alternatives for consumers. Existing alternatives for over-
indebted consumers include: discharge of debts after one year through bank-
ruptcy,usually administered by the Official Receiver,12 or a Debt Relief Order;13
partial repayment through an IndividualVoluntary Arrangement (IVA),nor mally
lasting five years;14 an administration order in the County Courts; a debt repay-
ment plan from a non-profit provider, a non-profit provider financed by credi-
tors, or a for-profit provider. A substantial private over-indebtedness industry
flourishes in the UK providing a variety of ‘debt solutions’ to consumers.15
Governments encouraged this privatisation which reduces the costs of state
provision of bankruptcy and debt advice.16 In contrast France prohibited private
debt management companies in 1985.17 The central contemporary differences
between the systems are: the overarching role of the public commissions in
France which act as an administrative sorter and processor of the over-indebted;
the absence of private debt management companies; the distinction drawn in
France between trader and consumer insolvency;18 and free access to the French
system of consumer debt-adjustment and insolvency.19 These distinctions be-
tween England and France represent opposite poles in debt treatment within
Europe, where the EU seeks an integrated capital and credit market but has
relied primarily on soft law and best practices in harmonising the treatment
of over-indebtedness.
This article explains the differences between these countries in terms of the
role of interest groups, including state actors, and ideologies. Historical contin-
gency also plays a role.The article proceeds as follows.First, the development of
the French institutional framework is described in some detail,including the role
of the Commissions and courts, changes in influential discourse on the reasons
for over-indebtedness in France which justified the increased availability of a
discharge of debts, and contemporary conceptualisation of le droit du suren-
dettement des particuliers. The State in France has been conceptualised as repre-
senting the general interest, but the treatment of over-indebtedness indicates the
12 See generally Insolvency Act 1986, Part IX. This may include an income payment agreement or
order over three years where there is surplus income.
13 See Insolvency Act 1986, Part 7A inserted by the Tribunals Courts and Enforcement Act 2007,
s 108(1) together with schedule 17 in force since April 2009. For the relevant rules see the
Insolvency (Amendment) Rules 2009.
14 The rules on IVAs are found in Insolvency Act 1986, Pt VIII, ss 252–263G. A straightforward
consumer IVA protocol exists for consumer cases. See http://www.insolvency.gov.uk/
insolvencyprofessionandlegislation/policychange/foum2007/plenarymeeting.htm (last visited 28
November 2011).
15 See Ministry of Justice, Department of Businesss Innovation and Skills et al, Debt Management
Schemes – Delivering effective and balanced solutions for debtors and creditors (London:TSO, 2009); For
an empirical analysis see S. Collard, An Independent Review of the Fee-Charging Debt Management
Industry (Bristol: Personal Finance Research Centre, 2009).
16 A. Walters, ‘Individual Voluntary Arrangements: a “fresh start” for salaried consumer debtors in
England and Wales’ (2009) 18 International Insolvency Review 5.
17 See Code de la Consommation, L. 321-1.
18 See discussion below at 239.
19 In England and Wales an individual must pay for access to bankruptcy,even for the Debt Relief
Order which requires a fee of £90. See below discussion at 329.
A Tale of Two Debtor s
© 2012 TheAuthor.The Moder n Law Review© 2012 The Modern Law Review Limited.
214 (2012) 75(2) MLR 212–248
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