DEBTLESS Market research

outcomes

2012, Klaipėda, Lithuania

The Think Twice project is part-funded by the European Commission. This market research is the work of and do not represent an official

document nor the views of the European Commission nor of the Executive Agency

2011-1-CZ1-GRU06-07128 3

PopulationMember State Population

in thousandsPopulation

% of EUArea km2

Area% of EU

Pop. DensityPeople/km2

EU 502,519.9 100 4,324,782 100 116.0

UK 62,435.7 12.42 244,820 5.5 251.7

IT 60,626.4 12.06 301,320 6.8 200.4

NL 16,655.8 3.3 41,526 0.9 396.9

CZ 10,532.8 2.1 78,866 1.8 132.8

BG 7,504.9 1.49 110,912 2.5 68.5

LT 3,244.6 0.65 65,200 1.5 51.4

SI 2,050.1 0.41 20,253 0.5 101.4

Numbers and developmentMarket research revealed that some countries are facing

challenges with decreasing number of population due to emigration (like Bulgaria, Lithuania), in other countries the population is increasing due to immigration (Italy, Slovenia, Netherlands).

But all partnership countries outlined the main challenge and demographic issue, which will undoubtedly have impact on countries social, economical countries lifes. These demographical issues are:

• Ageing of the population (this problem is relevant for all partner countries);

• The growth of life expectancy;

The density

Migration and ethnicity Citizens of the European Union are free to cross intra-European

borders in search of work and education opportunities, a higher standard of living, or even a more desirable climate. As an area of 27 countries with more than 500 million inhabitants, the European Union is currently the world’s best research laboratory on legal, transnational migration.

Migration is influenced by a combination of economic, political and social factors, either in a migrant’s country of origin (push factors) or in the country of destination (pull factors); historically, the relative economic prosperity and political stability of the EU are thought to have exerted a considerable pull effect on immigrants. In destination countries, international migration may be used as a tool to solve specific labour market shortages. However, international migration alone will almost certainly not reverse the ongoing trend of population ageing experienced in many parts of the EU.

Ethnicity

Country Ethnicity

UK English 83.6%, Scottish 8.6%, Welsh 4.9%; Northern Irish 2.9%, black 2%, Indian 1.8%, Pakistani 1.3%, mixed 1.2%, other 1.6% (2001)

IT Italian (includes small clusters of German-, French-, and Slovene-Italians in the north and Albanian- and Greek-Italians in the south)

NL Dutch 83%, other 17% (9% of non-Western origin, mainly Turks, Moroccans, Antilleans, Surinamese, and Indonesians) (1999 est.)

CZ Czech 90.4%, Moravian 3.7%, Slovak 1.9%, other 4% (2001)

BG Bulgarian 83.9%, Turk 9.4%, Roma 4.7%, other (including Macedonian, Armenian, Tatar, Circassian) 2% (2001)

LT Lithuanian 83.4%, Polish 6.7%, Russian 6.3%, other or unspecified 3.6% (2001)

SI Slovene 93.1%, Croat 1.8%, Serb 2%, Bosniak 1.1%, other or unspecified 12% (2001)

Initiatives and Sites with solutions

There are a lot of useful initiatives (at national and EU level), sites, TV shows, NGO’s ect. which are helping and supporting people with debts, educating them to learn how to manage money, how to live in efficient way according the incomes they get.

All partner countries have different kind of experience and offers helping to deal with the debt and insolvency problems. The significance of this problem can be proved by the numerous of organizations, websites, initiatives, TV shows, ect established and working in all partner countries.

National organizationsThese organizations deal with:• Indebtedness;• provide useful information;• implements prevention activities;• protects and represents consumer interests;• promotes the rational planning of family finances;• offers advice and information;• educate and help bring people towards a debt-less future ect.

These organizations are either representing the Third sector (NGO’S), public institutions or international/national organizations, associations. In some countries there are also governmental organizations dealing with these issues.

Such organizations are: • Bulgarian Chamber of Commerce;• Adiconsum, AGISA onlus, Regional office policy, Consulta nazionale antiusura, ect

(Italy);• Ministry’s of Finances center (Lithuania);• Slovene Consumers' Association;• NIBUD - Nationaal Instituut voor Budgetvoorlichting (Netherlands);• The European Consumer Debt Network (ECDN).

Sites

The market research revealed that UK has a lot of experience as well as various websites helping to deal with debts, informing about loans, helping to plan the family budget, or as it was mentioned in the report - spend less or borrow more.

Various sites in all partner countries offer:• financial advices;• management of financial risks;• evaluation of financial risks;• financial knowledge development;• budget planning instruments;• protection from unfair creditors;• online teaching;• counselling;

Figures The graphic illustrates the depth of the problems that the European economy faces. The euro-zone crisis reached a critical stage. GDP rose in most countries during 2011. Germany’s economy grew by a sprightly 3% according to its statistics office. The countries nearby with which Germany trades most heavily also fared well—though signs of incipient recession were visible towards the end of the year. By contrast GDP in Greece and Portugal has crashed under the weight of austerity. Greece’s economy may have contracted by as much as 6% in 2011. And the crisis is sapping the strength of even the so-called “core” euro-zone countries, such as Germany and France. The strains of the euro area’s sovereign-debt crisis make a recession in the early part of 2012 likely.

Countries with the Highest External Debts in Europe

Origin of debt

In the market research the origin of debt was divided in 5 categories:

• Survival Liabilities The debtor has not enough income relative to its fixed costs.

• Amounts overspending

• Adjustment payable The debts are a result of significant changes to the expenditure and income or lace.

• Compensation Liabilities These debts caused by psychological problems such as drug addiction or buy.

Survival Liabilities

Mostly common for:• People who live from the social minimum;• People with low financial possibilities;• Young people with no permanent job; • Aged people with a minimum retirement check;• Families with only one parent working etc.

This kind of debts are common for all partner countries, as in all of them there are numbers of people getting low incomes and facing problems to cover their basic needs.

Lessons to be learned (or how DEBTLESS could help here):• Provide information how to manage budget efficiently;• Learn where and how it is possible to save (to buy cheaper, to use cheaper

services, to evaluate spending possibilities – what person can afford at the moment and what is too expensive, ect.).

Amounts over

This debt arises because:

• As a result of poor financial management;• Poor planning and insufficient knowledge temperance;• Wrong perception of money;• Overspending;• Getting more then one loan at a time;

Though this problem is common for all partner countries as well, according UK provided statistics UK as a whole spend 80% of their income on servicing their debts, leaving little money to pay their rising food and fuel bills and all the other costs associated with life in today’s world.

Seeking to help people to get out of this kind of debts it is necessary to learn how to manage money, live according the incomes, take responsibility for what you buy, assess the need of buying things (whether it is really necessary or not, ect). The main thing is that in this case the debtor has enough money, but has too many loans closed and is therefore in financial trouble.

Adjustment payable

Divorce, unemployment, disability, death – changes in the structure of family (personal) incomes are the reasons of this kind of debts.

In this case it is necessary for family members to learn and understand that the needs should also change accordingly the situation.

In this case also various consultations about possible governmental allowances, subsidies, any other governmental support could help.

Compensation Liabilities

Especially common for young people who still do not have knowledge and experience how to manage money, how to plan expenditures.

This kind of debt usually is connected to the achievement of a certain status-symbol or appearance (to have a better car, phone, computer, ect).

Usually this kind of loans are provided not by banks, but by financial companies, moneylenders, fast credit companies or directly by the stores (ex. revolving card) instead.

The risky thing – the companies borrow money fast (“5 minutes and money will reach your account”), even to subjects with no financial guarantees.

In this case people usually do not evaluate the high (variable) interests in return.

Legal regulations

The activity of loaning is regulated by laws and regulations of Central Bank in all partner countries.

These regulations may include:

• The law of the bank of the Partner country;

• The law of consumption loans;

• Consumer Credit Act;

• Commerce Law;

• Law on Bankruptcy;

• Other.

Responsibility for executingClients, who are late on their payments might (depending from countries):• Receive reminder letters from their creditors informing them about their

debts;• Reminder telephone• Direct collection (debt collection agents, through "physical" contact with

the debtor view the real situation)• Formal notice (the debtor is ordered to pay the sum due within a

specified period, after which can start legal action with charge of all the extra costs).

In the case when individual does not succeed in reaching an agreement with the creditors, the debtor may make a request to the Court for a legal process.

In this case the court may reach a verdict and assign a bailiff to recover the property (the worst scenario). Then the person in debt would lose his property of the exact worth of his debt and of the expenses of bailiff, litigation and interest of the creditor for each month of delay.

SO........

........THINK TWICE BEFORE GETTING TO MONEY TRAP

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