In these times of crisis when credit is scarce, the Minister for the Middle Classes, Sabine Laruelle, and Koen Geens, the Minister of Finance, are pleading in favor of SMEs. They have set the bar very high with a new bill which forces banks to make a real effort to facilitate access to credit for SMEs.

Already approved by the government, this batch of proposals must be effective from next fall without retroactive effect on credit contracts already in progress.

What are the new measures?

In a context where more than half of SMEs have already given up in the face of banks’ reluctance to be more lenient in granting financing, the situation seems to be changing.

Banks will, in fact, soon be obliged to better explain the reasons for refusals. They will also have to deploy all possible means to find a solution to each credit request before closing their doors.

According to the head of government, these measures make perfect sense since SMEs constitute a real economic hub and a promising sector in terms of employment. More than real constraints, these measures aim to invite banks to make the information provided to their customers more transparent and to be more attentive to each request submitted to them before deciding. If the granting of credit is refused, the financial institution will need to justify its reasons through a clear and understandable statement.

Thanks to a more in-depth study of risk analysis, SMEs and self-employed people will be able to better prepare their file before processing a credit application. In the event of failure, they will have the opportunity to better understand the origin of the problem and try to improve their profile before resubmitting a credit application.

The UMC’s opinion

The Union of Middle Classes (UMC) does not hide its enthusiasm at this development of this situation which will undoubtedly gradually clear up the latent economic gloom which has already set in in the SME credit sector. The UMC also specifies that the claims of companies and self-employed people are not exaggerated since the amount borrowed is generally below 100,000 euros for self-employed people and around 200,000 euros for SMEs.

Another important point

Re-employment compensation will have to be estimated in such a way as to erase any gray area. Re-employment compensation will have to be estimated in such a way as to erase any gray area. Beyond this amount, banks and SMEs will need to work together to propose a rational calculation method within three months, otherwise the government will take its responsibilities.

This bill promises to breathe new life into the granting of credit for SMEs but we must not lose sight of the fact that banks will not fundamentally change their prudential policy and that a well-constructed file will always be the best guarantee of acceptance

The mortgage credit market is a revealing indicator of the health of the economy in Belgium. Indeed, the Belgians still consider that real estate investment is preponderant in the allocation of expenses in their budget. Also, an increase or on the contrary a contraction either in the number of contracts or in the amounts borrowed has a real value in terms of micro-economic analysis on the Belgian markets.

The mortgage market is stable

The number of mortgage credit contracts concluded over the July-September period is slightly lower than in the previous quarter but the overall amount of funds borrowed remained around 5 billion euros.

The latest statistics published by the Professional Credit Union (UPC) show that 46,000 mortgage credit contracts were signed, i.e. 2,000 months compared to the previous quarter. The drop in the number of contracts is almost mainly due to the decrease observed in renovation credits (-1,700).

Over one year, we still note a contraction of 9% in the number of contracts and 8% in terms of amounts borrowed.

The average amount borrowed is stable. For the purchase of a home the average stands at €135,000, which is the status quo compared to the previous quarter.

Note also that 78% of borrowers opted for a fixed rate in the third quarter.

We can therefore conclude that in general, the economy is no longer regressing but is not growing either.

The financial crisis – newspapers, radios, and televisions talk about it every day. You hardly pay attention to it, yet it affects your daily life. The latest measures by the Belgian government to meet the targets for reducing public deficits on sovereign debts are a striking example.

Recession or economic recovery? It seems that we are currently at a turning point, and the situations differ both in Europe and the United States. Why? This is what we will briefly discuss for you today.

Recession hits Europe

The countries of the European Union are bogged down by unsustainable amounts of sovereign debt in the long term. Governments are now paying for the budgetary laxity that has taken hold over the years. In short, our states have been living on credit for years, but today their debt is such that no one wants to lend them money anymore, except at high rates.

To cure the patient, Europe has imposed on member states not to exceed an annual public deficit of more than 3% of GDP. To achieve this goal, governments must cut public spending but also increase their revenues. These are the famous austerity measures that are hitting everywhere in Europe.

The corollary of this fiscal purge is stagnant growth and a catastrophic recession. Is austerity a cure-all or a deadly poison?

Uncle Sam’s money printing factory

In the United States, things are never done the same way as elsewhere. While the US public deficit reaches 120% of GDP, nearly $16.5 trillion, Republicans do not want to cut public spending or increase taxes, total liberalism obliges. President Obama is doing what he can to convince the Senate, but tax increases are still seen as a scarecrow in the United States. As a result, when the US runs out of money, they print more to support economic activity.

This suicidal policy has the positive effect of maintaining economic activity, but it is not sustainable in the long term. The upcoming debates in the United States will focus on reducing the public deficit.

Current developments in Europe

The situation in Europe seems to be positive. Europe appears to have avoided the bankruptcy of several states, and austerity measures allow states to more or less meet European targets. However, this fiscal arsenal seriously threatens household consumption, and recession sets in with the additional danger of reducing tax revenues, the perfect counterproductive effect.

Current developments in the United States

The United States will not escape reducing its abysmal deficit. The upcoming debates will be stormy but vital to the survival of the world’s largest economy. Economic activity is therefore inexorably bound to slow down in the United States in the very short term.

Nowadays, more and more teenagers live almost independently and no longer wait until adulthood to desire acquiring a scooter, a tablet, or a laptop…

Moreover, it is not uncommon for certain educational institutions to require students to attend classes with a laptop or tablet, allowing them to connect to the internet.

Unthinkable just a few years ago, credit professionals are often faced with credit requests from young teenagers or, more often, students.

Can a student or a minor borrow in Belgium?

A quick overview of this question that is sure to spark interest…

Not before 18

In Belgium and all European countries, the legislation is clear. No one can apply for credit until they reach the age of majority, which is 18 years.

The emancipated minor: what does it mean?

It is little known, but a minor can request the first instance court of their place of residence to be emancipated, meaning declared of age before turning 18.

This status requires that legal conditions be met. The candidate for emancipation will need the assistance of a lawyer to help with procedural steps. Note that the minor benefits from free legal assistance, known as “pro bono lawyer”. This means the minor is presumed indigent and will not have to pay attorney fees. The procedure is entirely free in Belgium.

Installment loan contracted by parents

Except for the exceptional case explained above, when a minor or a student wishes to take out a loan, they will have no choice but to ask their parents or legal representatives to contract it on their behalf. In this case, the parents take out an ordinary installment loan, and the minor’s name does not appear in the file. In other words, the minor does not bear any personal responsibility.

A banking product that comes from the United States

Some banks grant loans to students, but only to finance their studies and on the condition that the loan is repaid as soon as they start their professional life. These loans have strict conditions.

This phenomenon comes from the United States, where this type of loan is absolutely common. This different situation results from the fact that in the United States, as well as in the United Kingdom and Canada, the cost of higher education is much higher than in Europe. Therefore, some students have no choice but to incur debt during their studies.

In the United States, for example, the average amount of student loans is around €25,000.

Thus, the young person starts their professional career in debt, which raises some difficulties or ethical social and financial questions…

November has begun and with it its procession of rains. The first cool temperatures announce a long and cold winter. Last winter was harsh and long. Remember the negative temperatures that followed us until April and the return of good weather only in July. Many Belgians saw their heating oil consumption explode. Unfortunately, this harsh winter was coupled with a sharp increase in fuel prices, including the price of heating oil. Bad news for household budgets…

What does a liter of heating oil cost today?

On Wednesday, November 6, 2013, the price of a liter of heating oil is 0.83 €.

What is the recent trend?

• In recent years, the price of diesel has sharply increased with the scarcity of oil production.

A worrying observation…

• In 2005, the price of a liter of heating oil in Belgium was 0.52 €.
• In 2008, this price increased to 0.79 €, a rise of nearly 50%.
• In 2012, the cost of a liter of heating oil was around 0.90 €.
• In recent months, prices have evolved as follows: +99.4% in one month; +112.6% in 3 months; +104.7% in 6 months.

Why have fuel prices become so high?

The global market

We consume more and more fuel. Demand increases but supply decreases. This is mainly due to production limitations by oil-producing countries (OPEC).

The taxman

He is not to be pitied. The Belgian state also profits from each liter we consume. All excise duties, energy taxes, and VAT represent no less than 56% of the price of a liter of diesel. And for gasoline, it rises to 67%.

How to react to such an increase?

In reality, the consumer has little means of defense as they are subjected to market prices that they do not control. Moreover, it is the Belgian state that determines taxation. Nevertheless, some suppliers offer interesting discounts as soon as you order a large quantity of heating oil: 2,000 liters, for example.

In this regard, some consumers group together to place large orders together. This is a good idea.

European Popular Credit gives you a boost!

From this October 2013, we are launching our great heating oil action. Indeed, we offer you the possibility to finance the purchase of your heating oil order with a financing of the installment loan type – monthly payment for your heating oil. You will have the possibility to borrow at an attractive interest rate starting from 1,500 € and to repay your financing over a period of up to 24 months! Financing of 1,500 € represents an order of 1,666 liters of heating oil at the current rate.

Example of Financing: Installment loan of 1,500 € – APR of 9.95% – over 24 months – Monthly payment of 68.88 €, for a total cost after 24 months of 1,653.12 €. Your financing over 24 months therefore costs you 153.12 €!

From October 2013 to April 2014: our company offers you a 25 € fuel card for every heating oil credit.
Tip: don’t wait until the last minute to place an order because, as is well known, the price of a liter of heating oil increases during the winter as consumption increases. So you’ve been warned!

As we highlighted in our recent article on October 2, the number of credit contracts signed has significantly increased in recent years. Credit professionals have noticed a resurgence in the number of borrowers as well as an increase in the amounts borrowed. This situation has resulted in a significant increase in the number of defaults. To protect consumers, the Belgian government has decided to strengthen legislation. Effective solution or demagogic stopgap?

The observation

Payment defaults are increasing and affect nearly 5% of borrowers in Belgium.

Is this really surprising? One might doubt it, because, upstream, we have been witnessing for some years now, a significant increase in the number of credit contracts as well as an increase in the amounts borrowed.

What is this situation due to?

There are several factors to consider:

• The general trend of living on credit;
• The need to consume at all costs;
• A significant increase in the cost of living over the past decade;
• Stagnation of salaries compared to the faster increase in the cost of living (in 20 years, real estate has increased by 200%, while in the same period, salaries have only increased by 70%);
• A dramatic explosion of taxation implemented by a government that proves to be a prodigal accountant of public effects.

A capitalist model of consumption

The industrial world has only one obsession: consumption. We hear it everywhere, “growth is stalled.” We do not consume enough. Companies, industries are running at a slow pace because their order books look bleak (see the automotive industry in Europe). The balance of foreign trade is not in better shape: we import more than we export.

In short, we need to buy to keep an economy functioning that rests solely on this substrate. Stop consumption, and the system fails.

But of course, consume, but with what money?

How can our citizens still consume in the same proportions as in the past when taxation has created such a gap between the cost of living and income growth?

Europe and its member states are great schizophrenics who talk about growth and, in the same breath, kill consumption with fiscal repression that has never reached such a peak. It is an open secret or a mild understatement to say that Northern Europe is the place in the world where labor income is the most plundered.

So, of course, “consumers” have no choice but to resort to credit if they want to “at all costs” treat their addiction to consumption.

But whose fault is it?

The credit professionals who would be “big bad wolves unscrupulously taking advantage of the naivety or weakness of desperate consumers?”

Demagogues have taken the place of political scientists.

A draft bill in preparation

Our rulers do not care about such considerations and act as quickly as possible. The government therefore proposes a series of measures supposed to protect consumers. This draft should considerably strengthen the rules for granting consumer credit.

The measures being prepared are as follows:

• Less advertising by credit institutions;
• More research on the employer’s solvency;
• More information available to the borrower.

It is mainly mortgage credit that is targeted. The government is particularly tackling joint offers, which allow clients to obtain a better rate provided they also subscribe to ancillary products, such as fire insurance.

A bad project

For credit professionals, this project is deplorable for the following reasons:

• One can already legitimately wonder if, in our time, consumers need to be infantilized to the point where they do not realize the significance of their actions. In a society where the codification of laws has become pyramidal and where our individual responsibility is increasingly questioned, one can measure the hypocrisy of the conceptual approach…
• Reducing advertising is absolutely an illusion: it is not the advertising for credit that is the problem but… advertising for consumption. Yet, this is precisely what the state seeks, claiming everywhere that “we do not consume enough”…;
• More research on solvency? Everyone knows that “you can’t get blood from a stone.” Solvency research is obviously already at the heart of the process of credit companies. No bank would lend without having scrupulously studied all its guarantees;
• More information for borrowers? Let consumers start by reading the tons of information already available to them… which makes the information… unreadable.
• Mortgage credit? It is probably the most protected and best-guaranteed type of credit by the mortgage. The real difficulties are mainly encountered in small consumer credits of people who borrow 5,000.00 € for example to go on a family vacation…

Other consequences

One can really wonder when our government will understand that by continually imposing restrictive measures on the industry, it will end up hindering job creation and even tax revenue collection.

Moreover, according to the Professional Union of Credit (UPC), these new measures could cost the sector nearly 1,000 jobs.

The irony of history is that it is often by believing to help the most deprived that we make them even more precarious… because in reality, credit can often help people who are going through a temporary difficult period and who could, in theory, present a financially unfavorable situation for obtaining credit but who, through courage, will make it through.

These people tomorrow will be “told to go away” and there is no doubt that the consequences in terms of bankruptcy, unemployment, and reduction in public revenues will not be long in coming…

Since the subprime crisis of 2008 and the resounding bankruptcy of the American investment bank Lehman Brothers, which left a lasting impression, the banking world has been experiencing a severe crisis. This mistrust has not only settled in the relationships between retail clients and banks but also between banking institutions and their own regulatory authorities.

Thus, while European legislators deemed it wise to raise the deposit protection limits from €20,000 to €100,000 to reassure savers, regulatory authorities continuously encourage banks to strengthen their capital reserves and pass stress tests.

Furthermore, Europe is attempting to establish a broader banking union that would increase solidarity among banking institutions in times of difficulty.

The survey results

A study conducted between July and October 2013 by the firm Ernst & Young shows that more than one in two customers does not have complete trust in their main bank, a trend more pronounced in Europe than in the rest of the world.

According to this study conducted in 43 countries, 44% of customers claim to have “complete trust” in their main bank, a proportion that drops to 32% for European customers.

In France, 9% of respondents claim to have very limited trust in their bank, a proportion that affects 33% of Irish customers and 17% of Spanish customers.

Thus, while 40% of customers worldwide would recommend their main bank, this figure drops to 29% in Europe.

Why such dissatisfaction?

Numerous recent cases and scandals have tarnished the public’s trust in banks.

We are, of course, thinking of the J. Kerviel case, which cost Société Générale nearly 5 billion euros following dubious positions; the B. Madoff case, sentenced to 150 years in prison for a fraud involving nearly 65 billion US dollars; the recent LIBOR manipulations carried out by major banking institutions both in the City and on Wall Street. Just look at the latest film by M. Scorsese, “The Wolf of Wall Street” featuring Leonardo DiCaprio among other stars, to realize how catastrophic the public’s image of the banking world is. In this film, the viewer discovers brokers who truly have no knowledge (nor scruples) about the financial products they offer their clients.

Without delving into these “extraordinary” cases, the survey reveals that nearly a third of clients reported an issue with their bank in the past 12 months, and among them, 33% were dissatisfied with the resolution. A third of the very dissatisfied clients declared their intention to close all or part of their accounts.

Specific complaints in private banking

It is no secret that private bankers, those assigned to the discretionary management of securities portfolios, receive specific instructions from their employers to sell financial products developed by their banks. They even receive specific commissions (bonuses) if they succeed in selling these products to their clients.

Is it necessary to specify whether these products are good or bad (e.g., a bank offering you a life insurance product developed in-house)? Needless to say, there is strong pressure on small clients to buy products on the condition that they also subscribe to some “in-house” products. The banker will tell you that these are excellent products and that the management cost is reduced to zero because they are “in-house” products.

We have only one piece of advice for you: resist and compare! Only buy financial products that you are convinced meet your desires and your investor profile. Follow through with your ideas. Also compare with products from other banks.

Does your banker not want to follow your desires? Change banks. You will see that suddenly, they will view things differently.

How to choose your bank?

Our website is full of smart advice to support all your life projects, and choosing a trustworthy banker is certainly part of that. So take the time to read our advice article on choosing the right bank.

CPE is not a bank but a credit intermediary

Our company is not a bank but a credit intermediary.

Our mission is to help you obtain a personal loan or a mortgage from a banking institution.

To do this, we help you prepare your file to increase your chances of obtaining the credit you want.

Why not contact the bank directly?

There are several reasons for this:

• Banks delegate their retail activity to credit intermediaries like CPE;
• Banks only manage professional or very large credit requests;
• A credit intermediary ensures the diversity and competition that a bank cannot offer you;
• A credit intermediary can get you a decision within 48 hours, which will never happen with your banker.

Inflation is the devaluation of money caused by what is known as the price and wage spiral. This spiral corresponds to the constant increase in prices and wages through mutual influence. It is measured using the consumer price index.

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In other words:

Inflation is a general and sustained increase in the prices of goods and services. This situation corresponds to a decrease in the purchasing power of money. In short, for the same amount of money, you can buy less than before.

The causes of inflation

Increase in the money supply:

This is monetary credit inflation, which is an excessive increase in the money supply, causing prices to rise because the value of money decreases.

Supply and demand:

With the impact of the health crisis and lockdown, people have changed their lifestyles and needs. Companies struggle to meet consumer demand, which is why stocks have decreased, making some products rarer and therefore more expensive.

Increase in costs:

The increase in costs concerns the rise in the price of imported raw materials or finished products, and production costs. This is known as cost-push inflation.

Why does inflation impact us?

According to the European Commission’s report, the EU economy is expected to grow by 4.0% and 2.8% in 2022 and 2023, respectively, after significant growth of 5.3% in 2021. Growth in the euro area is also expected to reach 4.0% in 2022, before falling back to 2.7% in 2023. The EU’s GDP returned to pre-pandemic levels in the third quarter of 2021, and each member state is expected to reach this level by the end of 2022.

These new forecasts take into account government measures such as setting a maximum price for gas and electricity.

Indeed, it is the prices of energy, oil, and raw materials that have been driving the consumer price index upwards for months. As a result, the authorities in several European countries, such as Belgium and France, have developed price control mechanisms to limit the impact of inflation on consumers’ purchasing power.

However, despite savings measures, wages will increase, thanks to the index mechanism. This increase will vary from 2% to 3.17% depending on the sector.

According to the latest figures, the consumer price index increased by 3.2% annually in March, recording its highest growth rate in fifteen years.

Is inflation good news for my loan?

At first glance, this is rather bad news for consumers. However, one category can undoubtedly benefit: fixed-rate loan borrowers. Indeed, for those who have taken out a fixed-rate loan (with a fixed monthly payment), under the impact of inflation and provided their salary increases, the weight of the repayment installment will decrease. However, be careful to put this beneficial impact into perspective for households: first, inflation will result in a short-term loss of purchasing power, and the favorable effect will only exist if salaries increase.

Furthermore, the lasting nature of this inflation is also important for the effects to be noticeable. While the ECB continues to prioritize combating inflation.

For example, for a monthly payment of €990 granted with a salary of €3,000, if inflation continues at an annual rate of 3% over 3 years and the salary increases at the same rate, the borrower will repay €990 with a salary of €3,278, resulting in debt that would drop from 33% to 30%. This consolation is rather small. It is better to remember that the return of inflation acts as a redistribution of wealth. Since it impoverishes savers to enrich borrowers.

Finally, austerity policies within the EEA must be taken into account. Indeed, we know that if the German trade balance deficit is better than that of its neighbors, it is because in Germany, wages increase more slowly than inflation. Thus, we are no longer in a quasi-closed economy as in the 1970s. Our openness to the world risks slowing down wage growth, possibly falling well below inflation, to increase the competitiveness of countries with each other.

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In conclusion

Much ink has been spilled on this subject recently. Some right-wing parties are talking about the need to reduce the wage increase ratio compared to inflation, as in Germany. This position seems to be a real casus belli for all left-wing parties in Europe.

Finally, it remains to be seen whether, in the face of the realities of the opening of the global economy and the extraordinary competitiveness in Asia, European countries will not be forced to touch the rule of wage indexation in the face of inflation.

Is this another sign of the crisis? The number of over-indebted people reached a record 324,063 in September 2012. The percentage of defaulting borrowers is now 5.2%. This means that out of 100 loans granted, credit institutions record a 5.2% default rate. This leads the said institution to report the credit to the National Bank of Belgium.

Evolution of the number of over-indebtedness cases

This number, in truth, changes little. Indeed, if there are more over-indebted citizens, it is also because there are more credit contracts registered.

The proportion of defaulting credit contracts has remained stable. However, the average amount of unpaid debt has increased by 2,000 euros in 5 years. In 2007, when a Belgian had a debt, it averaged around 6,000 euros. This figure has risen to 8,000 euros today.

The situation varies by region. Payment defaults affect 8.1% of Brussels borrowers, 6.9% in Wallonia, and 3.5% in Flanders. While the percentage of over-indebted borrowers is lower in Flanders, the amount of their payment arrears is higher. It averages 9,500 euros.

The total amount of overdue repayments has increased in one year from 2.615 billion euros to 2.645 billion euros.

The profile of over-indebted people is very specific. Half of them are between 25 and 44 years old. Moreover, one in two lives in a household that earns no more than 1,250 euros per month.

The consequences of a payment default

Initially, the credit institution has the legal obligation to report the credit contract to the National Bank of Belgium. What does this mean? As soon as you have accumulated three unpaid monthly payments, the bank is required to notify you by registered letter and proceed with your registration with the National Bank of Belgium.

Direct consequence: you can no longer obtain credit in Belgium as long as you have not fully settled the amount of unpaid debts, including late interest and any penalties for reporting the credit contract. Then, the law requires you to wait another 15 months before you can borrow again in Belgium.

Furthermore, if the default concerns a mortgage, the consequences can be dramatic. The bank will, in addition to the registration, proceed with the foreclosure of the house and it can be sold at a public auction (exactly as happened in the United States or Spain following the recent real estate crises).

Sometimes, the borrower will have the unpleasant surprise of finding that despite the sale of the house, their debt remains very high because the default occurred in the early years, and the borrower has paid much more interest than principal…

Our prevention policy

At European Popular Credit, we have implemented a prevention policy to avoid payment defaults and we inform our clients about mortgage loans to best protect their interests.

Regarding personal loans, our brokers study and analyze the files of potential borrowers thoroughly. We respect a debt ratio that does not exceed 40% of income. We discuss with our clients the amounts requested, the desired durations, and the purpose of the funds. Sometimes it is better to receive a little less money, be more reasonable, but be sure to repay your loan. This is the essential advisory mission of our brokers.

In terms of mortgage loans, we practice absolute transparency. Some institutions sell borrowers very low interest rates. The downside is that the borrower repays much more interest than principal and in case of default in the first 10 to 15 years of the loan contract, it is a disaster.

We advise you to repay more principal than interest, even if it means paying a slightly higher monthly payment. The two advantages of this solution: we force you to become aware of your contributory capacity and you repay the principal much faster than the interest. In the end, the total cost of your loan is obviously lower, which is in your interest.