Debt recovery methods of unsecured consumer credits in the European Union

Abstract

In today's world, consumer lending occupies a special place in the financial services market. It provides a wide range of financial support to meet consumers' daily needs, including access to unsecured consumer credit. However, for many consumers unsecured consumer credit has become a significant financial burden. Over-indebtedness, insufficiency of funds, poverty, as well as financial myopia and irresponsible lending inter alia seriously and negatively affect the performance of credit obligations. Default in payments leads to the debt collection, where recoverability of unsecured consumer credits is often doubtful or even impossible. Given the special role and protection afforded to consumers in the European Union, debt recovery methods of unsecured consumer credits can be divided in two groups: out-of-court and in-court procedures, which include alternative dispute resolution and simplified litigation procedures for cross-border disputes and national procedures. In order to achieve full functionality of these methods, it is necessary to ensure effective judicial cooperation between the EU member states and to harmonize the requirements of the EU legislation with the national legislation of the EU member states in this field. Problems in combating over-indebtedness have an international nature. Hence, compliance with the principles of responsible lending, improvement of laws and practical support of consumers are highly required.