Jean-Louis Kiehl is pioneering a model to prevent excessive consumer debt and efficiently fight against social and financial exclusion. Through a wide range of social and legal support, trainings and innovative partnerships with banks and finance companies, Jean-Louis helps at-risk populations and also professionals manage financial issues, reduce the risk of excessive debt and shift current practices toward an improved and responsible credit system.
The New Idea
Because the French system lacks a Credit Bureau, Jean-Louis has developed a groundbreaking model to provide individuals with financial difficulties the social and legal support they need to reduce the risk of excessive debt and prevent social exclusion. Jean-Louis uses a threefold approach that focuses on education, prevention, and early detection. With respect to education, he combines individual follow-ups with web and radio consultations, as well as gives people the necessary advice and budget tools to relieve the burden of debt. Betting on prevention, Jean-Louis has successfully reshaped the activities of the citizen organization, Cresus, toward the empowerment of financially-weakened individuals and families.
Although aware that unbalanced budgets ultimately limit solutions, Jean-Louis is committed to breaking the vicious circle of debt as early as possible. He reinforces partnerships with on-the-ground partners, including social landlords, energy providers, and social workers, to detect financial troubles of clients and beneficiaries as soon as possible, as well as finding solutions. Through a large range of workshops and trainings, Jean-Louis also raises at-risk populations’ awareness of debt issues so that problems can be prevented before they even surface.
Convinced that solving excessive debt issues implies a shared responsibility, Jean-Louis is now shifting the practices of banks and finance companies on credit. He is currently running a pilot of a platform that is dedicated to debt prevention and is co-led by a number of major finance companies. In addition, he works to advocate for government policies toward the creation of a Credit Bureau. Jean-Louis’ breakthrough strategies address the roots of the excessive debt crisis.
Since 1980, poverty and debt have increased significantly and simultaneously in France: These issues are in fact intertwined. In only thirty years, the amount of outstanding credit has multiplied by four—as much as the number of people who submit their cases to debt committees, public entities led by the Bank of France that can write off people’s debts. Depending on the indicators, between one and two million individuals would be deeply in debt and risk personal liquidation. But the situation is all the more alarming when taking into account the fifteen million people—¼ of the French population—who have expressed difficulty in paying back their loans or credit payments every month in the latest report done by the Ombudsman of the French Republic.
The particularities of the credit system in France have caused harmful social consequences. Because France is one of the three countries in the world that does not have a Credit Bureau through which citizens’ outstanding credits are registered, it is possible to accumulate significant consumer loans without any means for the lenders to know if other loans exist. As a result, two million people are multicredit holders and the amount of excessive consumer debt is higher than anywhere else in the world: €45,000 (US$58,600) on average. The social cost of this reality is significant: The news stories about debtors committing suicide or assaulting banks are alarmingly common, reflecting the loneliness, deterioration of the family unit, financial exclusion, and poverty that result from this situation.
In 2009, the French Court of Auditors indicated that the situation was worsening, especially as a result of the lack of integrated policy to deal with citizens’ growing debt issues. Whereas, debt committees were dealing with 90,000 cases a year in 1990, now they must take care of 220,000 cases a year, with total cost of €195 million (US$254 million) of services for the Bank of France. In a system where the market has its own rules, the crux of the problem remains the lack of preventive actions and indicators to evaluate bad debt. Even though this problem of debt pervades all population segments, the few charities that do help with financial issues focus their work on only the poorest populations. Excessive debt is a social phenomenon that crosses age and social class, and requires a solution that reflects this reality. Indeed, 45 percent of those in serious debt have salaried positions and are considered middle-class.
Although individuals are ultimately responsible for the management of their revenues and expenses, banks and finance companies create fundamental problems with the products they offer to consumers and their opposition to “credit reports.” If the U.S. has suffered from the subprime product, the most criticized financial product in France and Europe is revolving credit. This cash cow of finance companies generates a profit margin rate up to 40 percent with a 25 percent rate of interest for the debtors. On the other hand, the Athling report highlights ambiguous advertising strategies that promote the accessibility and low level of monthly payments of revolving credits. Debt recovery is also at the heart of controversial practices, including reminders to debtors’ employers, credit offers to insolvent clients, and the use of violence. A new legislation passed in June 2010 imposes a maximum rate of interest for revolving credit, and is thus a first step to limit damages. Finance companies now need to reinvent their business models to develop their customers’ loyalty and a more socially responsible image.
Jean-Louis has enriched the original mission of Cresus by setting up a large range of tools to support people to find sustainable solutions to their financial crises. Every year, a network of 600 competent volunteers, including former lawyers, jurists or bankers, complete approximately 55,000 personal follow-ups. These follow-ups range from global diagnosis (personal, professional, and financial situation) to balanced budgets (over debt treatments, optimization of charges, and renegotiation of debts), to access to microcredit, as well as social and psychological support. The results of this educational aspect of his strategy are significant, as all the participants are trained and learn how to manage their budgets.
Due to increased demand, Jean-Louis has also created new strategies to reinforce his organization’s capacity: He continues to carry out the geographic expansion of his activities through a National Federation that already counts 19 regional associations and 117 welcome desks; he has developed online consultations to multiply the number of people that can access Cresus’ expertise (157,000 in 2010), and he has launched a web radio to provide information and advice to 250,000 in debt households.
To reinforce prevention and early detection of bad debt, Jean-Louis also offers trainings and workshops. First, he seeks to increase the number of actors who can prevent financial issues and provide support. He accomplishes this by transferring Cresus’ know-how and expertise to social workers, social landlords, and banks’ employees on legislations, consumer rights, as well as on how to detect the risk of over debt, or deal with debt recovery. Second, Jean-Louis raises awareness on budget and debt management among at-risk populations. He employs smart partnerships with organizations whose clients/beneficiaries have troubles paying the bills (e.g. social landlords and energy providers), do not use social benefits correctly (e.g. mutual groups) or need help on finance to ensure a long-lasting fresh start in life (e.g. social rehabilitation companies). Finally, Jean-Louis provides information and advice to individuals who may encounter financial troubles in the months to come, such as young people finishing their studies and coming to the point of earning their first revenues; or older people dealing with a small pension who often fall prey to over eager credit salesmen. In 2009 alone, more than 13,500 hours of training and information have been shared with these groups, generating great social impact as well as revenues for Cresus.
More recently, Jean-Louis has succeeded in creating a model that engages banks and finance companies in the prevention of excessive debt. In 2009, thanks to close links with the French Association of Finance Companies, he had the opportunity to present his concept in front of all the main banks and successfully convinced one to co-build the first experimental platform on excessive debt prevention. Launched in September 2010, the pilot has rapidly influenced the sector and seven partners are now part of the initiative. This platform allows the banks and Cresus to work together on excessive debt prevention. Through an extranet site, they both ensure the follow-up of clients in difficulty: Banks have the responsibility to detect clients with financial troubles early on and send their cases on the platform at the first “symptoms” (i.e. debiting payments refused or excessive overdraft). Under confidentiality clauses, a project team at Cresus will then diagnose personal and financial issues, freeze outstanding debts so that the situation does not get worse, and work on restructuring the debt. The role of Cresus has been particularly efficient: 80 percent of the main finance companies have accepted to be partners, and thus accept to spread debt payments over time and modify the nature of the credit.
The first evaluation shows the impact of this unique initiative with banks: In over 300 households that were part of the pilot, more than 70 percent are on the proper track to achieve a stable and balanced financial situation; 42 percent have modified their contracts to balance their budgets, and 100 percent of those who needed a rearrangement of their debts by creditors have obtained it. For the first partner, the Postal Bank, the initiative has successfully led to the recovery of €400,000 (US$521,260) overdue payments. In 2011, eight new partners joined the platform and Jean-Louis expects to support 100,000 people through it in 2012. As a unique initiative all over the globe, and even if Credit Bureaus exist elsewhere, excessive debt needs to be prevented and Jean-Louis is ambitious to spread his model in Europe.
The evaluation has also indicated that 72 percent of the people managed through the platform are multi-holders of credits. This fact reinforces Jean-Louis’ idea that a national register of debts has to be created to allow banks and finance companies to see if a person has outstanding credit before providing more. Through active participation on the committee to submit the dedicated law, Jean-Louis hopes the partnering banks will eventually support the project. Unfortunately, during Parliament’s vote in July 2011, the law passed, but it does not apply and he continues to lobby.
Jean-Louis has faced poverty and social exclusion through many experiences in his life. Despite great results at school, he began to work when he was only 14 to support his family out of necessity. Jean-Louis completed an accounting apprenticeship before joining the Daimler Company, which allowed him to receive training on corporate and institutional communication. A few years later, in an attempt to make his own choices, he went back to school, chose to study law and began a career as a jurist for private companies. In 1980 Jean-Louis’ company offered him the opportunity to work abroad as an expatriate. He accepted and spent fifteen years in Western Africa with his wife. When he returned to France in 1998, he went back to law school and specialized in consumer law. In 2000 Jean-Louis took a position at the Strasbourg Office of the Ombudsman of the French Republic. This work opened his eyes to the daily lives of citizens, and thus, he first encountered the issue of over debt.
Because Jean-Louis lacked in depth expertise with citizen debt, he began to volunteer for a local association, Cresus, founded in 1993. He progressively built his own expertise on the topic until 2004, when he took the lead and brought a new approach and a new direction to the organization. Indeed, Jean-Louis wanted to help people find solutions out of debt. He decided to work full-time at the association and shift the organization’s practices toward an innovative model of prevention.
Determined to reach as many people as possible, Jean-Louis also led Cresus’ geographical expansion. He created the Cresus Federation and facilitated the emergence of nineteen regional associations. Local associations shared his vision and he was elected as President of the National Federation. Additionally, he became the CEO of the Strasbourg Association and transformed it into an experimental lab to design and launch new types of support, preventive trainings, microcredit programs, and web radio. Jean-Louis also facilitated close connections with banks and finance companies.