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Introduction

On 13th November 2008, two hundred delegates drawn from twenty six countries gathered in London to discuss the global credit crisis. The conference recognised that taxpayers all over the world are now being required to foot a mounting bill to rescue banks and financial institutions. Yet, it is households who are feeling the worst effects of the meltdown in the global financial system. Consumers, who have been encouraged to take on excessive housing and consumer debt, are now struggling to avoid repossession and insolvency, savings and pensions are threatened, and unemployment is rising.

Our discussions were informed by the Council of Europe's Recommendation (Rec/(2007)8) concerning legal solutions to debt problems, which sets out a framework for Member States to

• Provide measures that will prevent over-indebtedness
• Alleviate the effects of debt recovery, and
• Rehabilitate over-indebted individuals and families

There was widespread support for the Council of Europe's framework at the conference, but also recognition that in many Member States the measures that were currently in place failed to take account of the crisis situation now facing households. Delegates therefore supported the making of the following declaration

The London Declaration

We, the European Coalition for Responsible Credit, with the support of our partners around the globe, call on our governments, financial regulators, and central banks, to take immediate action to support households in financial problems and to work with us and other consumer and social agencies, academics, and the labour movement to establish a new framework for the governance of credit markets at the international, European, and national levels.

The current crisis is a product of the long term neglect of consumer interests in the credit markets and inadequate regulation of the financial services industry. Over the past twenty years we have witnessed the continued weakening of consumer protections in the name of supporting free and efficient markets. The failure of this approach in the credit market is now self evident. This is not a crisis borne from providing access to credit to low income groups, but it is a product of providing them with irresponsible credit products and failing to protect their long term interests in the market.

We call on all governments across Europe to

• Improve help available to households in mortgage arrears, by
  
  • Establishing, with the financial services industry, ‘mortgage rescue funds’ for households that can be used to help borrowers restructure mortgages at affordable rates of interest over the next five to ten years
  • Providing courts with the power to halt the repossession of homes and to restructure mortgages by accessing ‘mortgage rescue funds’


• Enhance court protection for borrowers with unsecured debts, by
  
  • Providing for borrowers to obtain, on their own application, a temporary moratorium on recovery action for up to one year, subject to judicial discretion
  • Preventing unsecured lenders from obtaining legal charges on homes


• Ensure adequate provision of debt advice services by developing and implementing, with the active involvement of consumer and social agencies, a national debt advice plan. The plan should be developed following the commissioning of independent research into the demand for, and supply of, debt advice provision and current funding levels for advice services
  


• Include a duty in bank and credit licenses obliging lenders to ensure people on lower incomes have access to responsible credit products, and which requires lenders to report in a standardised and public way on their performance in meeting this obligation
  


• Improve governance of credit markets by actively involving consumers
  
  • Ensure that consumer and social agencies are represented on key policy making and supervisory bodies at the global, European, and national levels
  • Provide financial support to enable consumer and social agencies to participate in an ongoing dialogue with regulators and the financial services industry at the global, European, and national levels


• Develop a quasi bankruptcy procedure for banks which instead of just applying the principle of "too big to fail" provides the intervening State with the right to replace management, to adjust claims and to protect public interest in failing financial institutions without harming the well-functioning of the bank's systems with regard to the markets. Public guarantees and subsidies to banks should be given only with the obligation to act responsibly towards consumers and to return the money after it is no longer necessary to keep the bank from failure.

Signed this 13th November 2008
Professor Udo Reifner
Chair, European Coalition for Responsible Credit

click here to download the list of supporters

click here to download the London Declaration in German

click here to download the London Declaration in Romanian

click here to download the London Declaration in Croatian

click here to download the London Declaration in Portugese

click here to download the London Declaration in Slovenian

click here to download the London Declaration in Italian

click here to download the Report "Responding to the Mortgage Crisis in the UK" (Inclusion, Nov 2008)

click here to see the ECRC 'Subprime Declaration'

click here to see the ECRC Principles of Responsible Credit