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provided by Erasmus University Digital Repository bmgn - Historical Review | Volume 132-3 (2017) | pp. 115-138

From Hapless Victims of Desire to Responsibly Choosing Citizens

The Emancipation of Consumers in Low Countries’ Consumer

Credit Regulation 115

joost jonker, michael milo and johan vannerom1

Legal history can help to date shifts in social attitudes, because it shows how, when, and often also why norms changed. We demonstrate this by examining when consumer became widely accepted in the and , because general access to credit may serve as a good indicator of the advent of a consumer society. That shift in attitudes happened in both countries during the 1960s, when legislators came to accept that credit is part and parcel of modern life for everybody. The consequent equality of consumers before the law then became more and more fragmented in European regulation, sacrificed to its leading principle, the idea that well-informed consumers choose rationally and are therefore responsibly for their choices.

Van ongelukkige slachtoffers van verlangen naar de verantwoordelijke keuze van de burgers. De emancipatie van Nederlandse en Vlaamse consumenten in de wetgeving inzake consumentenkrediet Rechtsgeschiedenis kan helpen om verschuivingen in maatschappelijke opvattingen te dateren, omdat daaruit blijkt hoe, wanneer en vaak ook waarom normering veranderde. We demonstreren dit door te onderzoeken wanneer consumentenkrediet in Nederland en België gemeengoed werd, omdat de algemene bereikbaarheid daarvan goed kan gelden als het begin van de consumptiemaatschappij. Die kentering deed zich in beide landen tijdens de jaren 1960 voor, toen de wetgever vaststelde dat krediet bij ieders moderne levenspatroon hoorde. Die gelijkheid van consumenten voor de wet raakte

Published by Royal Netherlands Historical Society | knhg Creative Commons Attribution-NonCommercial 4.0 International License doi: 10.18352/bmgn-lchr.10401 | www.bmgn-lchr.nl | e-issn 2211-2898 | print issn 0165-0505 the rise of consumer society

vervolgens in Europese regelgeving steeds meer versplinterd door de consequenties van het informatieparadigma, de idee dat goed geïnformeerde consumenten rationeel kiezen en dus voor de gevolgen van hun keuzes verantwoordelijk zijn.

Introduction

Changes in social attitudes are often very hard to pinpoint in time. We know the before and the after well enough to label the before as different from the after, but we can rarely identify a precise moment in which before became after. Take the consumer society. At what moment in time had attitudes towards modern consumption patterns changed sufficiently for us to identify their general acceptance? Legal history can help here. Regulations, the law, and jurisprudence mirror society and thus change with it. That means we can track shifts in how societies see particular issues by examining proposed legislation, case law and jurisprudence, and particularly lawyers’ debates about those issues. Of course one cannot always pin down whether shifting legal opinions lead society or the other way around, but at least those shifts enable us to date changing attitudes a little better. Consumer credit regulation offers a good case in point. Historians have interpreted the rise of consumer credit use during the 1960s as marking the advent of a consumer society in the Netherlands, for instance, without really probing the timing or significance of this phenomenon.2 Economists examined the evolution of consumer credit, but omitted to ask what made attitudes change.3 By contrast, tackling the subject from a legal history perspective enables us to do just that, because it was a tightly regulated issue. Moreover, from that perspective we can trace changing attitudes better than, say, data about purchasing power or sales of consumer durables can do, because, unlike such figures, debates about regulation yield arguments about what ought to be permitted or not, and why. Doing that requires harnessing what legal historians do, i.e. interpreting the evolution of the law from the perspective of history, to the concerns of the social and economic historian, that is to say, tracing how and why attitudes in society change, with the risk of pleasing neither discipline. We decided to take the risk and undertake to compare Belgium with the Netherlands in the expectation that, starting from a similar legal basis and ending up under the same regulatory eu umbrella, attitudes to credit would

1 The authors are much obliged to Nick Huls for and Frankfurt generated much appreciated his welcome comments on earlier versions of comments. this paper. We have gratefully used material 2 K. Schuyt and E. Taverne, 1950, welvaart in zwart- collected in 2011 by Arne Mombers, Clara wit, de Nederlandse wederopbouw in 12 beelden (The olde Heuvel, and Hanneke Palm, then still law Hague 2000) 276. students at Utrecht University. Seminars at 3 D.S. Dotinga, Consumptief krediet in Nederland Nanterre University, the iish (Deventer 1983). jonker, milo, vannerom the emancipation of consumers in low countries’ consumer credit regulation 117 People are free in their People 4 into force until the Kingdom the of Netherlands force into Code) (Civil Wetboek Burgerlijk obtained its own in 1838, meanwhile Civil a new been replaced by Its sectionCode. about and credit, relevant for our argument here, About became in 1992. law Second, the increasing complexity of the increasing complexity Second, financial products modern to the early nineteenth back and reach We proceed chronologically Initially consumers were not seen to need protection, with regard to credit Initially consumers were not seen to need protection, as The Low Countries inherited equality before the law or anything else. constitutional principle from the Enlightenment and translated this during codification into a formal rule of contractual freedom. gradually eroded the equality of all citizens before the law, as one exception equality ofgradually eroded the all citizens before the law, that be made from the underlying general assumption after another had to despite the common legal Third, judge for themselves. all consumers could point of attitudes towards European regulation, departure and the shared two the continue to show subtle differences between consumer protection Belgian the free nursed a distinct suspicion against legislators countries. resulting in a range market as a source of mischief and they continue to do so, counterparts their Dutch By contrast, of measures for consumers. protective shown a greater trust in the market and individual responsibility always have minimized intervention. which as safeguards against mishaps, point of despite a common legal century to show how the two countries, the dangers ofdeparture and shared social prejudices about consumer credit, During the 1960s and other when it came to protection. diverged from each effectively rendering consumers in both countries, 1970s attitudes changed European regulation adopted that same principle, equal before the law. the idea that but added an important new one: the Information Paradigm, responsibly if Even so the consumers’ consumers choose properly informed. had to be did not last since one exception after another equality before the law to digest be expected that consumers couldn’t as it became clear Moreover, made. all kinds of the paradigm adopted turned effectively into a paradox. information, closely resemble each other and follow similar trajectories of change. We findWe of trajectories follow similar other and each resemble closely change. consumer perspective from a legal seen First, marked developments. three counted as they War World Until the Second emancipated. credit users legislation new However, and ignorance. ofpotential victims ineptitude, desire, of alike and perfectly capable all citizens as during the 1960s treated introduced was Henceforth credit themselves ifjudging for be bad for them. credit would we take as the which ofseen as part and parcel consumption patterns, modern full acceptance of society in all its ramifications. the consumer for the southern Civil Enshrined in the 1804 Code Netherlands, and the 1809 in the civil code Kingdom the of Netherlands. the Following incorporation the of northern Netherlands into came Civil Empire the Code the French in 1811 Points of departure: freedom of contracting versus consumer protection consumer versus departure: of contracting of freedom Points 4 the rise of consumer society

transactions, in choosing a counterparty, and in setting conditions.5 The French Code civil framers considered this formal contracting freedom as fundamental for both individual and general : freedom of contract would boost the economy, because every deal enriched contracting parties.6 Credit transactions formed no exception.7 If parties agreed an excessive rate, that was up to them, so borrowers had to fulfill loan contracts until expiry. Even so the law made an exception for pawnbroking and did this already under the French occupation (1795-1813), that is, long before the ‘social issue’ debate during the second half of the nineteenth century pilloried widespread malpractice. As the root of evils like and social depravation, pawnshops were subjected to a licensing system which amounted to a formal ban.8 However, the system foundered on the government’s dithering. It clung to the ban while omitting to provide the necessary alternatives to pawnshops. Consequently they simply remained in business, with license or without.9 In 1826 the Dutch government attempted to solve this problem by instructing the municipal loan banks to curb usury.10 This failed to work as well, because the pawnshops

the early codification in the Netherlands see: 107-117, ibidem 109; Stijns, Verbintenissenrecht 37; J.H.A. Lokin, J.M. Milo and C.H. van Rhee, ed., A. Van Oevelen, Algemeen verbintenissenrecht Tweehonderd Jaren Codificatie (Groningen 2010). ( 2010) 70-71. For Belgium: D. Heirbaut and G. Martyn, ed., 7 Cf. Burgerlijk Wetboek 1809, articles 1021. nalatenschap, tweehonderd jaar Burgerlijk 1636, and 1648 ff.; C. Sieburgh, ‘Western Law Wetboek in België (Mechelen,2005). of Contract’, in: M. Bussani and F. Werro, 5 A.S. Hartkamp & C.H. Sieburgh, Mr. C. Assers ed., European Private Law: a Handbook (Bern handleiding tot de beoefening van het Nederlands 2009) 172; E. Terryn, Bedenktijden in het Burgerlijk Recht 6: Verbintenissenrecht. Deel iii. consumentenrecht. Het herroepingsrecht als Algemeen overeenkomstenrecht, (Deventer 2014); instrument van consumentenbescherming O.O. Cherednychenko, Fundamental Rights, (Antwerp 2008) 44. Contract Law and the Protection of the Weaker Party. 8 The Act of 16 Pluviose, An xii (6 February 1804), A Comparative Analysis of the Constitutionalisation applicable in the Netherlands since 1810. For a of Contract Law, with Emphasis on Risky Financial history of pawnbroking see H.A.J. Maassen, Tussen Transactions (Munich 2007) 10-11; L. Cornelis, commercieel en sociaal krediet, de ontwikkeling van Algemene theorie van de verbintenis (Antwerp 2000) de Bank van Lening in Nederland van Lombard tot 19; M. De Potter De Ten Broeck, ‘De gekwalificeerde Gemeentelijke Kredietbank 1240-1940 (Hilversum benadeling aanvaard, maar wat met de grondslag?’ 1994). Unfortunately P.E.L.J. Soetaert, De Bergen (footnote under Cass. 9 November 2012), Tijdschrift van Barmhartigheid in de Spaanse, de Oostenrijkse voor Belgisch Burgerlijk Recht 26 (2013) 131-140, en de Franse Nederlanden (1618-1795) ( ibidem 135; S. Stijns, Verbintenissenrecht. Boek 1: de Gemeentekrediet, 1986) does not discuss the bronnen van verbintenissen (Brugge 2005) 37-38; W. post-1795 period. Van Gerven and S. Covemaeker, Verbintenissenrecht 9 C. olde Heuvel, ‘Strafrechtelijke handhaving van (Louvain 2001) 47-49; A. Van Oevelen, Algemeen pandbelening, Nederlandsch Juristenblad 88 (2013) verbintenissenrecht (Antwerp 2010) 72. 795. 6 K.-O. Knops, ‘Verbraucherschutz und 10 The Dutch gazette Staatsblad 31 October 1826, Kreditrecht’, Verbraucher und Recht 12 (1998) no. 132. jonker, milo, vannerom the emancipation of consumers in low countries’ consumer credit regulation 119

15 7 May 1865. , 7 May As the law put it, put it, As the law Archiv für die civilistische Praxis civilistische für die Archiv 16 Repeated attempts Repeated 11 70 (2010) 70 Louvain de droit de Annales , 78-79. verbintenissenrecht Algemeen , 21-24; H. Jacquemin, ‘Le formalisme This Act acknowledged usury and the usury acknowledged Act This 12 (Deventer 1981); (Deventer goed roerend van huurkoop tot ‘The and justice of confluence R. Cooter, efficiency law’, of analysis in the economic in: F. Parisi and C.K. (eds.), Law of The Origins Roweley Fathers Founding the by Essays Economics. and 2005)(Cheltenham 229; C. Canaris, ‘Wandlungen seiner zu des Schuldvertragsrechts, Tendenzen “Materialisierung” ’, (2000)185 ibidem 277; 273-363, Cornelis, Algemene theorie de protection de la partie faible au rapport contractuel’, het van 3-42, E. Swaenepoel, ibidem 14; Toetsing (Antwerp Van 2011) 27-29; evenwicht contractueel Oevelen, StaatsbladThe Belgian gazette 16 Therefore the Act did not do much more than an did not do much Act the Therefore 14 In reply to parliamentary questions the government professed itself questions the government professed In reply to parliamentary 13 1909-1910, no. 53-2. item Towards the end of century a different form of the nineteenth Towards Belgian legislators tackled these credit forms from the perspective of these credit forms from the perspective Belgian tackled legislators 1910, 321. 1910, overhaul of regulations for their plus new for pawnshops the license system keeping of did not get any form of records; their customers protection. surfaced in reactions to one determined by class prejudices, ambivalence, household furniture or When purchasing new forms of consumer credit. clothing upper strata of society received credit a matter of mostly others course, with social control for victuals like bread and milk or at cafés, bought on tick ensuring reasonable conditions and regular repayment all around. mechanisms brought durable consumer hire-purchase and installment schemes However, use raising fears that they would ofgoods within reach people on low incomes, These new credit and social status. these facilities to live beyond their means of mechanisms forms also remained impervious to the usual social control, power over the seller-creditor’s while getting a dubious reputation because seen as conducive to one-sided was conditions and usury. buyer-borrowers usury, defined in the 1865 Act concerning money lending as a misdemeanour, lending as a misdemeanour, Act concerning money defined in the 1865 usury, credit. both for professional lending and for consumer to bridle pawnbroking with new legislation foundered in Parliament until it in Parliament legislation foundered with new to bridle pawnbroking Act of 1910. Pawnshop the finally passed unwilling to confront a deeprooted and accepted phenomenon like pawn credit like pawn a deeprooted and accepted phenomenon unwilling to confront to achieve people how it on education to teach and put its hope for eliminating economic self-sufficiency. typically supplied small loans of a few guilders, which the loan banks couldloan banks the which of small loans supplied typically few guilders, a of not handle for reasons not or would cost and space. rising number of pawnshops as social evils, however without accepting them however without ofrising number as social evils, pawnshops principle of an exception on the reasons for making as sufficient contractual freedom. (Courtrai 1943). (Courtrai l’usure 1943). de répression La ) 1908-1909, no. 277-3, item p. 6. About the Consumentenkrediet. Sociaal-juridische Sociaal-juridische N. Huls, Consumentenkrediet. met betrekking in het bijzonder beschouwingen, Government reply questionsGovernment to (Memorie van Antwoord or MvA), htk Government memo (Memorie van Toelichting memoGovernment (Memorie van Toelichting the draftor MvT) accompanying Pawnshop Kamer (hereafterAct, Handelingen Tweede htk outlaw usury to attempts in Belgium C. Del Marmol, Other exploitation forms discussed consumer of C. Biquet-Mathieu, dans by intérêts sort Le des du Code désuétude ou du crédit. droit Actualité le 1998). (Liège civil? , krediet 193. sociaal en commercieel Maassen, Tussen Dutch Staatsblad

15 14 11 12 13 the rise of consumer society

lenders committed usury when they misused a borrower’s needs, weaknesses, passions, or ignorance to obtain, on behalf of themselves or others, an interest rate exceeding the normal rate and the cover for the loan’s risk.17 Therefore this concept of usury consisted of two elements, a subjective and an objective one. On the one hand the creditor must knowingly misuse a borrower’s weaknesses, for instance by exploiting a penurious situation to negotiate a higher interest rate. On the other hand the interest charged may not exceed the going market rate plus, depending on the case, a surcharge covering a borrower’s insolvency risk. A poorer borrower thus needs to pay more interest than financially sound ones, because the lender runs a higher risk of non-payment.18 One potential source of usury, compound interest or ‘anatocism’, was given particular attention. When in arrears borrowers had to pay not just interest over unpaid installments, but also over unpaid due, which could lead to a rapidly spiralling debt.19 For that reason Belgium bound compound interest to tight regulation. Only interest due over actual sums borrowed could be subject to new interest charges, and then under very strict conditions, that is to say in fulfilment of a court order or a special transaction, if and when that order or transaction concern interests due for a minimum of one whole year.20 Though curbing the usury associated with the new forms of consumer credit formed an equally powerful public concern in the Netherlands, the government failed to design effective legislation covering them, for two reasons.21 First, for technical legal reasons hire-purchase and installment credit fitted badly in the commercial law system and lawyers debating the issue showed themselves better at raising objections than at finding practical solutions. Second, lawyers clung to the hallowed principle of contracting freedom and would not consider making an exception for usury, let alone consumer credit.22 The lengthy debates highlight the deep social prejudices underlying them: in the Netherlands, as no doubt in Belgium, too, the

17 Burgerlijk Wetboek, article 1097ter. 21 Huls, Consumentenkrediet 15-16; C.J.H. Jansen, 18 D. Caplovitz, The Poor Pay More, Consumer ‘De Geldschieterswet van 28 januari 1932’, Practices of Low-Income Families ( 1967). Nederlands Tijdschrift voor Burgerlijk Recht 19 Belgian Supreme Court, cassation 29 January 26 (2015) 4-5. Cf. B. van Dam, nvvk, 75 jaar 1990, Pasicrisie belge 1990, i, 626; idem, cassation toonaangevend en springlevend (The Hague 2008) 28 November 1985, Pasicrisie belge 1986, i, 391; for an overview. idem, cassation 7 September 1978, Pasicrisie 22 See notably C. Del Marmol, ‘La clause de belge 1979, i, 17; Biquet-Mathieu, Le sort des réserve de propriété dans les ventes de meubles intérêts, 123-124; C. Van Hulle with contributions et la protection du vendeur’, Annales de droit by M. Dutordoir, K. Smedts, K. De Cock, H. commercial et industriel, français, étranger et Drijkoningen, T. Lievens and A. Vanderlinden, international 48 (1939) 177-219; more recently, M.E. Bank- en financiewezen, i (Louvain 2010) 26-28; Storme, ‘Eigendomsvoorbehoud en samenloop M.E. Storme, ‘Vragen rond rente’, Tijdschrift van buiten faillissement. Hof van Cassatie leidt aan de Vrederechters (1997) 196-203, ibidem 203. fantoompijn’, Rechtskundig Weekblad 80 (2011- 20 Burgerlijk Wetboek article 1154. 2012) 254-266. jonker, milo, vannerom the emancipation of consumers in low countries’ consumer credit regulation 121 1906 i, 84-198). One of them 24 , 17 ff. J.A. ff. , 17 Levy pleaded 1906 ii njv However, in 1902 the Supreme in 1902 However, 25 7720. In the debate following the 27 The keynotes were given by Paul and Scholten by given were The keynotes A.A.H. njv (Handelingen Struycken Handelingen he was ‘second for a ban.passionately However, displeasure’, none J.H.A.to in voicing Lokin de daad, en droom and C.J.H. Jansen, Tussen 1870-1995 (Zwolle Juristen-Vereniging Nederlandse the 80-5 convince not 90 and could 1995) majority; idem, 80. v (The Hague 2000). The two dissertations were (Utrecht M.A.H.L. Afbetalingscontracten van Lier, and H.L.1892) Hemsing, Het afbetalingscontract 1892). (Dordrecht , 70. Afbetalingscontracten Lier, Van het Supreme van Court 7 February Weekblad 1902, Recht

28 27 25 26 26 , Lawyers did criticize unfair clauses in hire-purchase criticize unfair clauses did Lawyers 23 utters felt no immediate need for legislation, let alone a ban. let alone a ban. The njv felt no immediate need for legislation, 28 Juristen Vereeniging Society (Nederlandsche Law years later the Dutch Four and formulated by the lawyer the and lawyer formulated by fraction, referring Act a Danish to advocated binding legislation and notably a ban on sellers formally keeping keeping and notably a ban on sellers formally advocated binding legislation to the state ought it, as the author put ownership of because, goods sold, damages against self-inflicted especially the propertyless, protect its citizens, or weakness. incurred through inexperience Court rejected that view. ) discussed the need for legislation covering installment plans. Both installment plans. or njv) discussed the need for legislation covering , unlike in the Netherlands, keynote lectures noted the near absence of of prevalence data on the and the us, jurisprudence, Britain, Austria, and ofconsumer credit, academic debate. lectures some of the society’s members pleaded emphatically for a total lectures some of the society’s principle of but an overwhelming majority held fast to the ban, contractual be on their guard in any obligation to freedom and the individual citizen’s transactions. A small majority considered a change in the law desirable, but only as part of but only as part desirable, the law in small majority considered a change A various overhaul designed to give consumers a more general commercial law clear rules for extensions, guarantees: fairer clauses covering shortfalls, constitutional principle of constitutional in which a society mirrored the law before equality behaviour. class-bound as was for granted, were taken distinctions class Hire-purchase dangerous as means credit were considered and installment Instead, status on credit. to live above their on low incomes to seduce people and learn to save properly, to manage money first learn how people should credit. before taking P.H. de Kanter pilloried de Kanter pilloried and liberal mp P.H. The lawyer and installment contracts. while the following year two academic as early as 1891, them in parliament were published. installment purchases dissertations about , the lawyer L.G., the lawyer Kortenhorst, htk , 1891-1892, sessions of 24 November, 24 of sessions November, , 1891-1892, 1928-1929, 612 and following, Frida as by as well 612 1928-1929, Katz the chu of idem, 1917: 665. 8 May of htk See 1891.4 and 9 December De Kanter mp serious criticism, the minister which counters – the law scripta vigilantibus with the simple iura protects the law watchful This (p. 351). Roman principle can be found in an opinion from the centurysecond ad Scaevola. it found later Almost four its centuries the Emperor into way Justinianus’s legal texts: 42.8.24.Digests J.E. See Spruit, R. Feenstra and vertaling en Civilis. Tekst Iuris Corpus Wubbe, F.B.J. Discussed at lengthDiscussed the leader the by of Catholic party rksp

24 23 the rise of consumer society

 The last quarter of the nineteenth century saw a rapid spread of new consumer credit forms like buying on installments: an adverti- sement in the newspaper Haagsche Courant, 5 May 1884, offering ‘all kinds of goods’ on installment. National Library of the Netherlands, The Hague. jonker, milo, vannerom the emancipation of consumers in low countries’ consumer credit regulation 123

31 30 That overhaul never overhaul That (Arnhem 1957). 29 These proposals were on 33 That same year another That same (Civil Code) articles Code) and (Civil 1576 7a:1576 32 , 1928-1929, item no. 395. item , 1928-1929, htk Jansen,Cf. ‘Geldschieterswet’; Huls, Schoonderbeek,De 57-58; W. Consumentenkrediet geldschieterswet Report Committee ‘Verslag van de Commissie van de regeling de wettelijke inzake afbetalingsovereenkomst’ (The Hague 1932). the bw Cf. a-g about installment plans and art.7:a:1576h-x about hire-purchase. An installment plan is a sale and contract purchase parties in which agree that the sale will be paid in installments, price two or are due more after which of has the buyer the productreceived in question. Hire-purchase is the reservation involving a variation on the above ownership.of 31 32 33 34 , this license , Contrary to the 1932 Geldschieterswet 34 1906 i, 196- ) 1931, 669. ) 1931, s had tabled draft legislation to combat usury. draft legislation to five mps had tabled Meanwhile , 136-137. Keynote deliverer Keynote 1906 i, 136-137. and a statutory duty to repay installments not due. not installments duty to repay statutory and a Referring to recent reports about malpractices in the so-called people’s the so-called malpractices in to recent reports about Referring people’s and state binding contractual rules these initiators wanted credit business, led to Parliament Their proposal supervision of concerned. the institutions at last curtailed which ), Act (Geldschieterswet Providers passing the 1932 Credit put under creditors were ofthe hallowed freedom Pawn contracting. imposition through a licensing system and the government supervision standing A of with maximum rates. mandatory transparent conditions the rules were applied. commission made sure (Civic Code), and on the other in the (Civic Code), the one hand realized in article 1576 bw usury imposed a license system to tackle Act which Installment Providers and door-to-door selling. government commission reported on legislating installment plans. The plans. reported on legislating installment government commission denied the existence of moralizing, report avoided and claimed malpractices However, and hire-purchase boosted retail sales. that installment purchases ofthe commission did identify some points including a declining friction, and and expensive legal procedures, willingness to meet payment deadlines consumer protection. step towards its proposed remedies made a half-hearted did require market-determined, though Hire-purchase plans, and installment against their own ineptitude. legislation in order to protect consumers by imposing statutory duties to provide to be achieved That would have by state supervision on door-to-door information on buyers and sellers, and by certain statutory contract clauses. selling, happened, but a court ruling in 1931 fulfilled some of fulfilled in 1931 court ruling but a happened, by desiderata these a hire-purchaserstating that the property concerned, arrears had to return in the remaining installments. be freed from paying in order to (hereafter nj Handelingen njv Handelingen He considered that far. refused go to Struycken German in contrast to and Austrian Dutch law, in intent, as hardly social butlaw, felt that there be very had to strong arguments for principle a key such as the autonomy changing did contractingof Struycken parties. However, no idea about having the to importanceconcede installmentof malpractices, credit and associated and therefore no proper the Dutch answer law to society’s njv questions: Handelingen 197. Van Lier had prepared defining the ground by Van 197. for reservationthe conditions Van ownership: of , 19. Afbetalingscontracten Lier, Supreme Court, Nederlandsche 1931, March 26 Jurisprudentie 29 30 the rise of consumer society

system never worked since the government failed to enact the supervision of installment providers.35 Thus from a similar legal point of departure the two countries reacted very differently to hire-purchase and installment plans. Whereas Belgium sacrificed contracting freedom to consumer protection early, it took the Netherlands some seventy years before doing the same.

Curtailing creditors

After the Second World War both countries showed a curious phenomenon. Rising incomes boosted the use of consumer credit, but social prejudices against it remained virtually unchanged. Immediately after the war the Dutch government, fearing that post-war scarcities would combine with strong pent-up demand to create serious bottlenecks, introduced consumer credit restrictions. In 1946 all pawnshop licenses were cancelled and the issuing of new ones halted, rendering the Pandhuiswet an empty shell, because existing pawnshops were allowed to remain in business.36 That same year the government also created a scheme for people wanting to buy ‘indispensable consumer durables’. The scheme entailed a system of tightly regulated, ­non-profit loans in the form of vouchers with which people could buy goods like shoes, clothes and certain household goods at designated shops. The system’s provisions for rescheduling payments in case of arrears were remarkably lenient.37 Intended as provisional, these measures triggered a debate about overhauling the existing legislation concerning pawnshops and installment plans. Some authors noted that consumer credit rose without a rise in abuse.38 At the same time an official report on installment plans clung to

35 Already in 1942 an article Nederlandsch Juristen ‘Strafrechtelijke handhaving’, and for a private law Blad signalled the lack of supervision: Huls, perspective A. Salomons, ‘Goederenrechtelijke Consumentenkrediet 69. aspecten van pandbelening’, Weekblad voor 36 The Act of 28 October 1946, which ratified a Privaatrecht, Notarisambt en Registratie 6986 decree issued jointly by the secretaries-general (2013) 653-655. heading the ministries of the Interior and Justice 37 htk 1945-1946, item no. 182-3. Between 1948 in 1942. Prior to the parliamentary debate and 1961 the Act against price pushing and pawnshops are characterized as ‘the least goods hoarding (Dutch Staatsblad 1939, 634) desirable institutions responding to the credit imposed maximum rates on installment needs of the poorer population’, Annex Tweede plans, in effect handicapping proper pricing: Kamer 1946, no. 25. The empty shell was only Huls, Consumentenkrediet 73. The postwar filled by the Pawn Lending Act 2014. See for a developments analyzed by Van Dam, nvvk 35-66. penal law perspective on this issue Olde Heuvel, 38 Schoonderbeek, Geldschieterswet 305-306. jonker, milo, vannerom the emancipation of consumers in low countries’ consumer credit regulation 125 The 43 Three years 40 This form ofThis form is a self-regulation 41 Transactions of the Belgian of 1954-1955, no. Senate Transactions Representatives, of the Chamber 211. Addressing Affairs the Minister Jean for Economic Rey underlined that installment plans widely were class, the working needs which by used protection against Transactions certain excesses, 20 1956-1957, Representatives of theof Chamber no. 716. June 1957, E.H. Hondius,‘Non-Legislative of Means Protection,Consumer The Dutch Perspective’, 7 (1984) 137-156. Policy Consumer of Journal

42 43 42 The debate resulted in the 1961 Installment Plans Act Act Plans in the 1961 Installment The debate resulted 39 Belgian legislators showed similar attitudes. In 1955 a government Belgian showed similar attitudes. legislators 1961, no. 218. The Burgerlijk form of ‘soft law’ that counts as an effective means of that counts as an effective regulating producer- law’ ‘soft form of consumer relations. reply to parliamentary comments on a draft installment purchases law law installment purchases reply to parliamentary comments on a draft the increasing popularity of at but underlined acknowledged this credit type, they on low incomes to buy goods which ‘people the same time that it enabled according was exactly where, That first’. could not buy cash without saving The combination of long payment a social danger lurked. to the government, and the immediate enjoyment of the coveted product low payments, terms, to turn worse, their ability to pay and, could easily lead buyers to overestimate The power of advertising modern a blind eye to the hidden high interest rates. and indeed ‘ambiguously by fuelling desire increased that danger still further, economic objections to an unbridled The reply added particular fraudulently’. as exaggerating business expansion of such installment purchasing, and inflation. stimulating consumption over investment, fluctuations, Bureau (Bureau banks set up the Bureau for Credit Registration later the high street of or bkr) as a central repository Krediet Registratie enabling the transactions lenders agreed to obtain prior information Affiliated mandatory checks. to register all on all borrowers of 250 and 100,000 guilders, sums between as behoves good sellers on ‘in a way and in all respects to act transactions, on installment’.installment and lenders received opinion about trusting the market while reiterating the pre-war pre-war the while reiterating market the about trusting opinion received supply ofThe to be left ought little means people with credit to prejudices. excesses and regulations to curb in only by hemmed market, to the free their inexperience and groups against weak social protect economically . thoughtlessness (Wet op het afbetalingsstelsel), which retained the licensing system while while the licensing system retained which afbetalingsstelsel), (Wet op het ofgiving a better definition plans and imposing a statutory installment of the creditworthiness duty on sellers to check purchasers. proposed law central, public register for installment plans remained a good public register for installment plans remained a good central, proposed law intention for the moment. Art., 81. Huls,40. Consumentenkrediet Rapport in its Rapport This was the Lichtenauer committee (The Hague 1954); het afbetalingswezen omtrent , 77.Huls, Consumentenkrediet Dutch Staatsblad Wetboek’s section installmentWetboek’s credit concerning was left a unchanged, but introduced law the new different, broader definition installment of plans hire-purchase. made cover was which also to The operating only targeted commercially law installment financiers.

39 40 41 the rise of consumer society

 Since 1964 the Bureau Krediet Registratie (bkr) records all consumer crediet in the Netherlands. Photo: www.bkr.nl. jonker, milo, vannerom the emancipation of consumers in low countries’ consumer credit regulation 127 1973, That 438. law 1972, no. 399. Promulgated in 1972, the act the act Promulgated in 1972, 46 Dutch Staatsblad item no. 9952-3 Government Motivation, Government 21. no. 9952-3 item One practices the new of the was by targeted door-to-door selling, concerning law published in the Dutch Staatsblad installmentamended plans concerning the law a fixed a noveltyand introduced in Dutch law, also reflection term. can Buyers the cancel transaction give and to without having days within eight Thereby so. the for reflection doing a reason term protects against buyers acting in haste: Motivation, 1970- Chamber Government Second no. 11106-3;1971, item Motivation. Government 1968-1969, no. 9952-3, Chamber item 11.Second

47 47 Consumer credit was no longer regarded as a dubious excess to be excess to be regarded as a dubious no longer credit was Consumer 45 Thus the 1972 Consumer Credit Act (Wet op het consumptiefThus the 1972 Consumer Credit ) geldkrediet Towards the end of the 1960s opinions in the Low Countries changed, of the end changed, Low Countries in the opinions the 1960s Towards The proposal’s title, Consumer Credit Act, eloquently summed up the the summed up eloquently Act, Credit Consumer title, The proposal’s 44 marked a clear break with the past in four respects. First, the old social First, respects. marked a clear break with the past in four no longer seen as a threat Consumer credit was prejudices had disappeared. but accepted as a normal part of modern living for to particular social classes, this conceptual Second, a facility enabling citizens to consume. everybody, protecting translated into the government dropping the close focus on switch In in effect recognizing the equality ofthe weak, all consumers before the law. Act accepted all citizens as classless consumers differentiated the other words, the normative idea Third, patterns. primarily by income level and spending the principle Fourth, had disappeared. that people should first learn to save ’s Geldschieterswet the 1932 supervising by the commission Prodded however. replace that a proposal to government submitted Dutch the license system, Act. had shown had shown the 1932 Geldschieterswet principles which retained the regulatory of the prevention malpractices through a licensing creditor i.e. to work, and government rates, transparent conditions with maximum system, supervision. bridled through the firm supervision of creditors, but presented as a normal but presented as a normal firm supervision ofbridled through the creditors, conceptual In a remarkable aspect ofneed of modern society in guidelines. in even labelled consumer credit saving the government turnaround, bigger than group much wonder that the proposal targeted a No hindsight. was The draft law the usurers parasiting on them. the socially weak and all new kinds citizens and included regulations for meant for all ordinary of street banks. credit offered by the high changed conceptions which the government’s accompanying motivation accompanying motivation the government’s which conceptions changed spelt out. Transactions Second Chamber 1968-1969, Chamber item Second Transactions no. 9952. 85. Transactions Huls, Consumentenkrediet, no. 9952-5 item 1969-1970, Chamber Second Report,Provisional p. Papers 1. Chamber Second Motivation, Government 1968-1969, no. 9952-3 1968-1969, Chamber Second 11. Transactions Unfortunately publicly the Commission’s The stopavailable in the 1930s. records long-term chairman andcommission’s one of G. law, van den Bergh, the the of 1932 initiators left his papers the International Institute to History,for 8 and Social 9 Amsterdam. Boxes activitycover his as chairman, but only up to 1962.

46 45 44 the rise of consumer society

of contractual freedom was sacrificed to the need for consumer protection.48 This watershed coincided with changing behaviour. Between 1960 and 1970 rising disposable income boosted the amount of consumer credit supplied from the equivalent of 65 million euro to 814 million.49 Even so two-thirds of respondents people interviewed for market research purposes during the second half of the 1960s expressed themselves against installment purchasing.50 Similar changes in attitude and behaviour occurred in Belgium. Early signs were visible by 1964, when government proposals to bring personal loans under the same regime as installment purchases avoided all qualifications about the likely target group, as did the subsequent parliamentary debate on the proposals.51 In 1977 the government submitted a consumer credit law to parliament which acknowledged the equality of all users by simply referring to consumers.52 Sent back to the drawing board by parliament, the government unveiled a new proposal in 1987, its motivation showing a full emancipation of consumer credit. The fast growth of amounts supplied and the absence of serious problems demonstrated that consumer credit’s negative connotations had disappeared; it had now become a key function of the consumer society which rendered goods accessible to a wide public. Borrowers fulfilled their obligations generally quite well, despite signs of rising excess debt cases. The law was designed to reduce their number, in part through mandatory registration of transactions at the central debt administration bureau which had finally been set up two years earlier, in 1985. That institute did not belong to the private sector, as in the Netherlands, but formed a department of the Nationale Bank van België, the central bank.53 The Belgian Consumer Credit Act

48 Historical introductions to consumer law 50 A. Pais, Consumer credit in The Netherlands traditionally use a speech by us President John (Rotterdam 1975), 155 and idem, ‘Op de pof’, F. Kennedy from 1962 to pinpoint the origins De Economist 117 (1969) 1-23, ibidem 2, 6-7 of consumentism: ‘Consumers by definition doi:10.1007/BF01726047. includes us all.’ See for instance the contribution 51 Transactions Belgian Senate 1963-1964, by Gerhard Rijken, ‘Ontstaan en positie van het nos. 217 and 342; Transactions Chamber of consumentenrecht’, in: E.H. Hondius and G. Representatives, no. 921-2. Rijken, Handboek Consumentenrecht (Zutphen 52 Transactions Chamber of Representatives 1976- 2015) 19-30. 1977, no. 1102-1. 49 cbs Statline http://statline.cbs.nl/ 53 Transactions Belgian Senate 1987-1988, no. 638-1. Statweb/publication/?DM=SLNL&PA=3 The Act’s contents discussed amply by J. Van Den 7758&D1=109-118&D2=22,27,32,37,42,63- Bergh, Koop (afbetalingsovereenkomsten) (Brussels 74&HDR=T&STB=G1&VW=T. (4 August 2016). 1960); A. De Caluwe, Les ventes, les prêts et les prêts A good summary of the factors driving the rising personnels à tempérament, les obligations de brasserie demand for credit in N. Huls, Vergeef ons vaker (Brussels 1965); J. Van Den Bergh and A. De Caluwe, onze schulden, naar een schone lei 2.0 (The Hague Afbetalingsovereenkomsten, financieringshuur, 2016) 27-29. brouwerijovereenkomsten ( 1975). jonker, milo, vannerom the emancipation of consumers in low countries’ consumer credit regulation 129 44-56.

55 Consumer eu In 1975 the European In 1975 the European 54 integration’, in: H.-W. Micklitz, N. Reich in: H.-W. integration’, , prospectusplicht Geharmoniseerde eu (Antwerp 2009)1-60, ibidem 21-22; R. (Cheltenham 2010) (Cheltenham 366-405, ibidem 385; 2011) 3-31, ibidemE. 16 and 20-21; Poillot, Droit et uniformisation consommation la de européen (Paris 2006) I. 94; contrats Ramsay, des du droit ‘Regulation credit’, consumer of in: G. Howells, Kraft Wilhelmsson and D. (eds.), T. I. Ramsay, consumer international on research of Handbook law N. interests consumer Reich, ‘Economic law, and (eds.), Understanding Rott and P. Law Steennot, ‘Sanctionering van inbreuken op naar het consumentenrecht: de zoektocht Evers een rechtvaardige oplossing’, in: F. en recht Lefranc, tussen ed., Kiezen and P. 2009) ibidem (Bruges 145-155, rechtvaardigheid G. Straetmans, 146; ‘Some thoughtson the future Business acquis’, consumer European European (2009) 20 Review 423-442,Law ibidem 428-429; Colaert, and V. ‘Reclameregulering Dyck Van T. van consumentenbescherming’,als vorm in: C. Buyle, M. Bruyneel, Delierneux, Romain J.P. J.F. A. Den Haute (eds.), Amicorum and E. Liber Van (Brussels 2008) T. ibidem 33-72, Bruyneel 35-36; Micklitz,Wilhelmsson, G. and H.-W. Howells ‘European Law’, Consumer in: M. Bussani a Law: Private (eds.), European Werro and F. (BernHandbook 2009) ibidem 245-291, 261. For an overview the of historical development of the information Van see law paradigm in finance Dyck, 3 February

en haar haar en L of the European the of European (2011) 142 def. com ; Consumers’ equality before the law had hardly been achieved or it began or it began had hardly been achieved equality before the law Consumers’ by European regulation. to be restricted again (Wet van 12 juni 1991 op het consumentenkrediet) reached the statute book in statute book the reached consumentenkrediet) op het 12 juni 1991 van (Wet 1991. Council adopted the so-called Information Paradigm as the first general so-calledCouncil adopted the as the first general Information Paradigm if correct given principle ofidea that consumers, the consumer protection, take rational and proper decisions. will and complete information, ; Guidelineeec 87/102/ Van Dyck adopts definition this for Dyck the Van protection idem, see investors, of De Kritische prospectusplicht. geharmoniseerde prospectusplicht geharmoniseerde de van analyse 2003/71/ eg Prospectusrichtlijn in de Frankrijk, Nederland, in België, omzettingswetten 2010) , (Bruges Duitsland en Koninkrijk het Verenigd 44. The numerous guidelines latest contain mandatory information duties and/or advice for suppliers or services: goods for of see instance Guideline 2008/122/ec Parliament and the Council of 14 JanuaryParliament 14 of and the Council 2009 about the protection facing consumers of certain aspects transactions of the concerning parttime use, products holiday long duration, of Gazette on andselling exchange, 2009, 33, issue Guideline 10-30; 2008/48/ ec for a Guideline[Proposal the of European home Parliament concerning and the Council transactions].finance S. also Cf. Grundmann ‘European Contract Atamer, Law and Y.M. and Contracts Banking after the Financial for Contracting Challenges Crisis: and Market in: S. GrundmannTransactions’, and Y.M. Crisis Services,Atamer (eds.), Financial Financial Failure Law. Contract European General and (Alphen a/d Rijn Contracting of Challenges and Consumentenbescherming bij de de bij J.See Consumentenbescherming Vannerom, kredietovereenkomsten van herziening en uitvoering (Antwerp 86-99. 2015) European regulation: the Information Paradigm regulation: European

55 54 the rise of consumer society

Consumers must therefore inform themselves before buying, but they will only be free to choose if they possess sufficient and correct information.56 Conversely, sellers have mandatory information duties.57 That information may concern either the legal position of the consumer, for instance their right to cancel within a fortnight, or practical data such as the price or the cost of goods or services.58 Sellers must show themselves active in providing all relevant information, because they are often in a better position to obtain it.59 Access to credit information bureaus enables lenders, for instance, to better estimate the possibilities for repayment than consumers can do.60 The mandatory duty to inform can have considerable implications. It was ultimately raised to a fundamental consumer right.61 The information paradigm does have a flipside, however. Consumers can only choose judiciously if properly informed, but then they are also responsible their decisions.62 Careless or imprudent consumers must therefore expect firm treatment.63

56 J. Stuyck and G. Straetmans, Financiële diensten en GmbH; CoJ C-315/92, Verband Sozialer Wettbewerb de consument. Bankdiensten – Consumentenkrediet eV v. Clinique Laborataires snc en Estée Lauder – Hypothecair krediet – Verzekeringen – Cosmetics GmbH; consideration 17 CoJ C-126/91, Handelspraktijken volgens het Belgisch en Europees Schutzverband gegen Unwesen in der Wirtschaft recht (Antwerp 1994) 31-32. eV. v. Yves Rocher GmbH; considerations 15-17 57 Consideration 3, Council Resolution dated 14 inclusive CoJ C-373/90, Nissan. Wilhelmsson, April 1975 outlining a first eec programme for Howells and Micklitz, ‘European Consumer Law’ a policy concerning consumer protection and 270-271. information, Gazette L 24 April 1975, 1; E. Poillot, 62 Cf. in this sense also O. Bar-Gill and E. Warren, Droit europeen, 94. Council Resolution of 19 May ‘Making Credit Safer’, University of Pennsylvania 1981 outlining a second eec programme for a Law Review 157 (2008) 101-201, ibidem 109, policy concerning consumer protection and distinguishing between ‘the rational uninformed information, Gazette L 3 June 1981, 6. consumer’ and ‘the imperfectly rational 58 Following article vii. 70 wer the creditor must consumer’; C. Camerer, S. Issacharoff, G. also tell consumers about their right to cancel: Loewenstein, T. O’Donoghue and M. Rabin, Jacquemin, ‘Le formalisme’, 11-13. ‘Regulation for Conservatives: Behavioral 59 Stuyck and Straetmans, Financiële diensten, 39. Economics and the Case for “Asymmetric 60 Y.M. Atamer, ‘Duty of Responsible Lending: Paternalism” ’, University of Pennsylvania Law Should the European Union Take Action?’, in: Review 152 (2003) 1211-1254, ibidem 1215; Grundmann and Atamer, Financial Services, 179- R. Posner, Economic Analysis of Law (New 202, ibidem 199. York 2003) 17-18. Van Dyck, Geharmoniseerde 61 Considerations 35 and 36 CoJ 178/84, prospectusplicht, 493. Commission v. Federal Republic of Germany 63 R. Incardona and C. Poncibò, ‘The Average (Reinheitsgebot); consideration 19 CoJ C-238/89, Consumer, the Unfair Commercial Practices Pall Corp. v. P.J. Dahlhausen & Co.; cf. also Directive, and the Cognitive Revolution’, Journal of consideration 24 CoJ C-470/93, Verein gegen consumer policy 30 (2007) 21-38, ibidem 27. Unwesen in Handel und Gewerbe Köln eV. v. Mars jonker, milo, vannerom the emancipation of consumers in low countries’ consumer credit regulation 131

67

69 Pénzügyi Pénzügyi The guideline 65 Second, unlike people in Second, 66 ; J. Stuyck, ‘Consumentenbescherming Milenium 45 Falconis in tijden crisis’, Jura van economische (2009-2010) ibidem 328. 323-333, vb C-137/08, CoJ Consideration 46 ; consideration 29 Schneider Zrt. Ferenc Lízing v. sl Telecomunicaciones C-40/08,CoJ Asturcom ; consideration Nogueira Rodríguez Cristina v. v. Claro Mostaza Maria C-168/05, CoJ Elias 25 ; J. Rinkes, Milenium ‘De consument Movil Centro partij’,als zwakke 48 (2009) Aequi 380-387, Ars , 24-25. Swaenepoel, Toetsing ibidem 381-382; -plichten en A. De Boeck, Informatierechten van uitvoering en totstandkoming de bij en draagwijdte grondslagen, overeenkomsten: A. (Antwerpsancties 2000) De Boeck, 434-435; ‘De van informatieverplichting de professioneel Merchiers, ed.,t.a.v. de consument’, in: Y. Swaenepoel, 40; 1998) (Bruges Consumentenrecht trust Consumers’ , 698-699. in their own Toetsing Sinn, D. remains high.banker for instance W. Cf. and M. Lubig Bankkunden D. Kasch, Was Vater, 11-12. 2012) (Munich wollen wirklich 68 69 The character ofThe character relationships between To reduce the scope for legal shams, it dropped it dropped for legal shams, reduce the scope To 68 64 v. v. Cristina Cristina v. Pénzügyi Lízing Lízing Pénzügyi Interpreting the directive, the European Court of the European Interpreting the directive, Justice formulated These principles were enshrined in the first European consumer consumer European the first in were enshrined principles These consideration 25 CoJ C-168/05, CoJ consideration 25

formulated minimum requirements for consumer protection, including requirements for consumer protection, formulated minimum mandatory contract, a written for creditors, statutory license systems borrowers to and a right for rights, limits to repossession information duties, early repayment. following the principle of serving the First, the law two general principles. averagely an Normal: and Mrs. defined a kind of the Court Mr. watchful, consumer. and watchful prudent, informed, sellers and buyers may also weaken the latter’s position, for instance if position, it leads latter’s sellers and buyers may also weaken the client manager, bank’s say their them to believe that a business representative, best. rather than the business, suits them, will propose solutions which credit directive, issued in 1987 to harmonize the varying levels of levels varying the to harmonize in 1987 issued consumer directive, credit in member states. protection Sellers of or services will often present consumers with non- products negotiable standard contracts. business consumers deserve protection because they have a weaker position. deserve protection because they have business consumers the customary terms ofthe customary hire-purchase and instead installment credit and definition of functional broad, adopted a credit derived from consumer go. all forms in one conceptions and covering American . In Quintero Murciano Rocio v. Asturcom Telecomunicaciones sl Telecomunicaciones Asturcom sa . ; consideration 36 CoJ GmbH; consideration 36 CoJ Group Lancaster Sektkellerei eV v. Verbraucherschutzverein C-303/97, ; consideration 31 CoJ Co G.C. GmbH und Kessler Tusky Rudolf en GmbH C-210/96, Springenheide Gut . Steinfurt Kreises des Oberkreisdirektor v. until C-244/98, C-240/98 Grupo CoJ Oceano Editorial Consideration 25, theCourt out points that the protectionsystem consumer of embodied in the guideline departs from the idea that consumers vis-a-vis position in a weak find themselves sellers also: See information less than they. and possess vb C-137/08, CoJ Consideration 46 Movil Centro v. Claro Mostaza Maria Elias Considerations accompanying Guideline 87/102/ Considerations accompanying eec 68. no. 19785-3, item 1986-1987, Chamber Second Court C-220/98,Consideration 27 Justice of (CoJ) ohg GmbH & Co. Cosmetics Estée Lauder CoJ ; consideration 29 Schneider Zrt. Ferenc v. C-40/08, ; Nogueira Rodríguez

67 66 65 64 the rise of consumer society

Information asymmetries between sellers and buyers also weaken the latter’s negotiating position, because the former always possess more information.70

Becoming ever more particular

The first European directive and the subsequent Court decisions treated all consumers alike and aimed to provide minimum protection levels in member states. Soon those levels began to diverge more and more. Free to impose additional requirements, member states discovered consumer protection as a practical cover for all kind of protectionist policies, damaging the free circulation of goods and services, for instance the scope for crossborder credit flows.71 Moreover, national courts retained the authority to apply the directive’s guidelines to local circumstances, thereby rendering them increasingly particular. Finally, the mandatory information duties failed to bring about greater harmonization, but rather a creeping differentiation between consumers by country. The multitude of European languages, for instance, posed certain a-priori demands. French consumers cannot be expected to understand a loan contract in Italian, so national legislators may impose mandatory language requirements to protect consumers.72 However, that requirement must be proportional to the consumer protection envisaged.73 Member states may thus force foreign creditors to translate their loan contracts.74 In short, what counted as normal in one member state could not in fairness be called that in another one. This led to different gauges for normal consumer behaviour depending on circumstances, society, culture, and product or service.75 At the same time Mr. and Mrs. Normal were increasingly differentiated following the recognition that their ability to choose responsibly depends on circumstances, and that circumstances often require extra consumer protection.76 Consumers facing doorstep

70 CoJ C-168/05, Elias Maria Mostaza Claro v. Centro Acquis and the Internal Market’, European Movil Milenium. Business Law Review 20 (2009) 409-422, 71 rl 2008/48, l 133/66, overweging 4. ibidem 413. 72 CoJ C-33/97, Colim v. Bigg’s Continent Noord nv. 75 Consideration 18 Guideline 2005/29/eg; CoJ Though this verdict concerned the freedom for C-220/98, Estée Lauder Cosmetics; Incardona goods, it appears applicable to services as well. and Poncibò, ‘The average consumer’, 22-26; 73 Consideration 19-20 CoJ C-154/89, Commissie v. E. Terryn, Bedenktijden in het consumentenrecht. France (Tourist guides); Stuyck and Straetmans, Het herroepingsrecht als instrument van Financiële diensten, 29-30. consumentenbescherming (Antwerp 2008) 38; 74 Considerations 15 and 17 CoJ C-85/94, Groupement Swaenepoel, Toetsing, 57-58. des Producteurs, Importateurs et Agents Généraux 76 Terryn, Bedenktijden, 41. Cf. also P. Bülow, d’Eaux Minérales Etrangères, vzw (Piageme) and ‘§ 497’, in: P. Bülow and M. Artz, ed., others v. Peeters nv; L. Gormley, ‘The Consumer Verbraucherkreditrecht (Munich 2011) 480. jonker, milo, vannerom the emancipation of consumers in low countries’ consumer credit regulation 133 Consumer Consumer 79 . Critically As it turned As it turned 81 As a result the As a result the 83 2 (2013) 69-79. 2 (2013) , http://www.fsa.gov.uk/pubs/ 2008/48, consideration 9. L 133/66, Bar-Gill and Warren, ‘Making Credit Safer’, ‘Making and Warren, Bar-Gill De Meza, D. B. Irlenbusch 112; Reyniers, and D. Economics A Behavioural Capability: Financial Perspective 2008, consumer-research/crpr69.pdf, D. 20; A.M. Grether, Schwartz and L.L. Wilde, ‘The Information of Irrelevance Analysis an Overload: California and Southern Disclosure’, Search of 277-303, (1985-1986) 58 ibidem 277- Review Law and Wilhelmsson, Howells ‘ec 278; Law’, 380-381. Article 5 (3) Guideline 2005/29/ec on the determinability vulnerable of groups B.B. consumers of The van Duivenvoorde, underProtection Consumers Vulnerable of the Unfair Practices Commercial Directive, und Unternehmens- furZeitschrift Europaisches Verbraucherrecht ‘TheIncardona and consumer’, Poncibò, average 28-29. rl 80 82 81 83 Somebody with a strong need for money with a strong need Somebody 77

4 June Finally a specific group of Finally a specific group vulnerable consumers were

l of the the of 80 82 Distance to sellers means buyers need extra protection, because need extra protection, sellers means buyers Distance to The divergence in protection levels between member states made member states made The divergence in protection levels between Consumers may also become more vulnerable as a consequence ofmore vulnerable as may also become Consumers 78 realize that consumer protection should be raised to a higher level be raised to a higher level eu realize that consumer protection should conditions sooner than a borrower without pressures of without pressures sooner than a borrower conditions will accept time or money. the the functional retained adopted in 2008, new guideline, A all around. definition of credit transactions of the previous one. how they handle information. They do not always act with perfect rationality, rationality, act with perfect not always They do how they handle information. for yet fail to act accordingly, information, they may possess sufficient underestimate the likelihood ofinstance because they loss of income through illness or job loss. salesmen, for instance, have a weaker position, the more so if more so the a weaker position, certain they need have for instance, salesmen, sellers know this. things and recognized, i.e. people of or it could be expected that their mental whom i.e. recognized, them more than or their gullibility exposed their age, physical handicap, others to the risks of trade practices or products. particular out it proved not always easy to delineate this target group from the average this target group from the average easy to delineate out it proved not always consumer. rule they cannot really see, let alone test, the goods or services. let alone test, really see, as a rule they cannot guideline’s coverage was extended to wage claims, the partial transfer of the claims, extended to wage coverage was guideline’s products and to new future income for a lower amount than will be paid, . See also also . See Services Business Educational ec Guideline 97/7/ Consideration 14 ParliamentEuropean dated and the Council about protection consumer 1997 May 20 transactions distances concerning involving between and buyers sellers, Gazette 144, issue 19-27. 1997, Prosecution v. R. sarl Buet and v. Prosecution C-382/87, CoJ and ; Stuyck Services Business Educational , 31. Consideration Straetmans, diensten Financiële R. Buet and v. Prosecution C-382/87, CoJ 13 sarl the articles Marktpraktijken ‘Wet en 58-64 consumentenbescherming’ about consumer transactionsprotection concerning away closed from premises. business Jacquemin, ‘Le formalisme’, and 9-10 13-14, R. Steennot, ‘De impact van het privaat financieel recht op de wilsautonomie, de contractvrijheid en het http:// consensualisme’, www.law.ugent.be/fli/wps/pdf/WP2010-15.pdf, 2010, 34.

78 79 77 the rise of consumer society

 Today consumer credit is accessible by mobile phone: a screenshot of an offer in July 2017. Photo: Johan Vannerom. jonker, milo, vannerom the emancipation of consumers in low countries’ consumer credit regulation 135 : de 2005, 2012, 2012, 1998, 660 1998, 192 11 July 11 2003, nj 5 June 2009, nj 5 June 2009, nj 26 June 26 1998, nj 23 May 1997, nj 1997, May 23 (Deventer 2014)121-139; M. De Muynck 2014)121-139; (Deventer Keus, J. Kortmann and C. Sieburgh, Europese Privaatrecht het Nederlandse op Invloeden ii and J.M. van Poelgeest, ‘Het aanbieden van na Richtlijn 2008/48/consumentenkrediet eg Nederlandse aan elkaar en Belgische regelgeving en getoetst’, Tijdschrift Consumentenrecht voor 55-63. 2012-2, handelspraktijken Articles and 60. 7:59 For the Netherlands, for instance verdict Supreme Court hr (Rabo/Everaars); hr de Klundert/Rabo);(Van hr hr Zuylen/Rabo); (Van 103 vaker ons Huls, Cf. Vergeef (De Treek/Dexia). 182 24-25, 29-31. Supreme CourtVerdict hr 4.8.4. r.o. (Den Treek/Dexia), 182 86 87 88 Conversely, member states may apply the apply the member states may Conversely, 85 Transactions also needed to be entered on standard also Transactions 86 7949; 4484. However, when deciding relatively simple consumer However, 87 However, the guideline makes no statements about about statements makes no guideline the However, 84 bw :2012: has specified 88 The new guideline also testified to a changed conception of consumers. changed conception of testified to a The new guideline also consumers. 3090; Court Justice of forms disclosing the lender’s identity, and detailing the loan’s terms and the loan’s and detailing identity, lender’s forms disclosing the borrower’s and the cost, and duration, form, as particular conditions such thoroughly inform Lenders must or cancellation. options to early repayment and ensure that they do not creditworthiness themselves about borrowers’ with debt; ifoverburden themselves transactions appear irresponsible, more or Those mandatory duties run lenders should not enter into them. prompted the courts, duties which less parallel to the particular fiduciary from imposed on their providers by cases about complex financial products, the 1990s onwards. like flash loans. like flash On the one hand lenders were put under fairly comprehensive mandatory were put under fairly comprehensive On the one hand lenders in publicity and prior including information duties both rules of behaviour, to closing a transaction. guideline to subjects formally not covered by it. Thus the Netherlands and and Thus the Netherlands not covered by it. to subjects formally guideline below 75,000 euros and and those above brought free loans Belgium have the guideline. 200 under credit transactions Dutch judges continued to hold consumers to their own credit transactions Dutch kept them from overburdening themselves should have which responsibility, with debt. mandatory licenses for lenders apart from the options mentioned in contract contract mentioned in apart from the options licenses for lenders mandatory supervision. and sanctions, law, considers wage claims as offering as offering claims wage considers afm Court of Justice Rotterdam 20 April 20 2012, Court Justice Rotterdam of bx :2012: ecli:nl:rbrot bw :2012: ecli:nl:rbbre 2012, Breda 2 May Heutger, About Guideline 2008/48 V. in: A.S.‘Consumentenkrediet’, Hartkamp, L. a loan without license: verdict withouta loan Court license: Justice of ecli:rbarn 2012, Arnhem 4 May those costs as 1 percent of the sum per of loan as 1 percent costs those and in total. no euros more The than 50 year Dutch Exempted from the extendedExempted guideline, be it fromnot financial supervision, are mortgage loans, hire and lease, transactions concerning overdrafts be repaid within a month, to credit cards, without loans or interest other be repaidcosts, within three and to loans months at marginal cost. The Belgian financial supervision authority afm 85 84 the rise of consumer society

From Paradigm to Paradox

Meanwhile national and international authorities woke up to the fact that mandatory information duties for financial service providers are not enough,89 because a large percentage of consumers do not understand what the information provided.90 If consumers are to assume their own responsibility, they need to become, in modern parlance, ‘financially literate’, which they seldom are. Consequently, the Information Paradigm leads to an Information Paradox: to be free to choose, consumers must be forced to absorb information that barely interests them. Consumers take little active interest in their financial affairs. A 2007 survey in Belgium showed that only 35 percent of those questioned had looked for information from two or more banks.91 Apparently consumers consider the bother of getting all information to outweigh its use.92 This highlights another consequence of the Information Paradigm mentioned above. Accepting that informing consumers is the best way of protecting them also means accepting that consumers are liable for the consequences of their choices.93 Regulatory authorities are reluctant to accept that consequence. As a result initiatives for the financial education of consumers retain a certain degree of paternalism which partly defeats

89 See Vannerom, Consumentenbescherming, 111-113. 90 V. Mak, ‘Een financieel geletterd consument As early as 2008, the Belgian financial market telt voor twee, wat te doen met de anderen?’, authority developed initiatives for training the Tijdschrift voor Consumentenrecht en financial abilities of consumers: L. Van Cauter, Handelspraktijken 7:3 (2012) 96-98; Heutger, ‘De fsma en de bescherming van de financiële ‘Consumentenkrediet’; J.J.A. Braspenning in consument’, Bank- en Financiewezen 75 (2011), a critical note under the verdict of the Court 267-272. cbfa, Verslag over het bevorderen van de of Justice Arnhem-Leeuwarden 2 September financiële kennis in België, http://www.cbfa.be/ 2014, Tijdschrift voor Consumentenrecht en nl/consultations/lop/pdf/2008-10_promotion. handelspraktijken 10:2 (2015) 82-89. pdf [website no longer available], 2008, 30-39. 91 Cf. cbfa, Verslag over het bevorderen van de For international initiatives see: eu, European financiële kennis in België; cf. also De Meza, Insurance and Occupational Pensions Authority, Irlenbusch and Reyniers, Financial Capability ‘Report on Financial Literacy and Education. 10-20 and A. Atkinson, S. McKay, E. Kempson Initiatives by Competent Authorities’(2011), and S. Collard, Levels of Financial Capability in the https://eiopa.europa.eu/, 38p; the oecd, uk: Results of a Baseline Survey, http://www.fsa. ‘Recommendation of the Concil on Good gov.uk/pubs/consumer-research/crpr47.pdf Practices on Financial Education and Awareness (2006). Relating to Credit’(2009), www.oecd.org; oecd, 92 G. Becker, ‘The Economic Way of Looking at ‘Recommendation on Principles and Good Behavior’, in: F. Parisi and C.K. Roweley, ed., Practices for Financial Education and Awareness’ The Origins of Law and Economics. Essays by the (2005), http://www.oecd.org/finance/financial- Founding Fathers (Cheltenham 2005) 135-155, education/35108560.pdf, 7p.; World Bank, ‘Good ibidem 141. Practices for Financial Consumer Protection’. 93 Van Dyck, Geharmoniseerde prospectusplicht, 93. jonker, milo, vannerom the emancipation of consumers in low countries’ consumer credit regulation 137 ’s hallowed freedom of hallowed contracting. ’s 2008, R.A. also 5. See Epstein, ‘The Neoclassical Contracts’, Consumer of Economics Bar-Gill in: O. Behavioral and R.A. Contracts: Epstein, Consumer An exchange Economics. Neoclassical vs. Economics , A. Epstein Richard and Oren Bar-Gill between http://ssrn.com/abstract=982527 (New York 2007) 1-19, ibidem 6-7. over het over and the Code de Commerce During the 1960s general attitudes towards consumer credit changed consumer credit changed During the 1960s general attitudes towards 94 the purpose of campaigns to improve consumer protection. Therefore the Therefore ofthe purpose protection. consumer to improve campaigns forms of alternative for ifsearch must be continued, protection consumer financial to improve their find it difficult it is a fact that people only because skills. in both countries. As rising disposable incomes boosted credit use, credit came incomes boosted credit use, As rising disposable in both countries. to be seen as a normal part of modern life and modern consumption patterns New legislation eliminated previous prejudices and rendered for everyone. a momentous shift in attitudes equal before the law, all consumers classless, in our view marks the general acceptance ofwhich consumption modern the advent ofsociety. the consumer i.e. patterns in all their ramifications, consumer European did not last. that equality before the law However, the principle that Paradigm, protection legislation adopted the Information case they are in which choices, properly informed consumers make rational Normal been and Mrs. had Mr. Hardly responsible for what they choose. into more and more categories created or consumers were being subdivided Our comparison of in the credit and consumption towards attitudes changing based on social prejudice, first of a negative view, Low Countries showed, all, the At ofmainly affecting people on low incomes. consumer credit as a vice from a highly similar legal basis, developed, same time the two countries Belgium curtailed combat usury, To ills. perceived tackle different policies to the Code de Civil to trust the market’s baulked at that and preferred lawyers Dutch However, until the Geldschieterswet injustices, ability to balance interests and eradicate in 1932 introduced a combination of mandatory standard contracts and This difference between the two government supervision of the sector. Belgium showing a mistrust ofcountries became more marked over time, relying more on the Netherlands the market and a tendency to intervene, responsibility to prevent own and the consumer’s the market and on soft law mishaps. Van Dyck also pleads forms also of for alternative Dyck Van Dyck, ‘Antwoord Van protection:consumer T. op de open van de consultatie cbfa Verslag over het bevorderen van de het financiële bevorderen over Verslag in België’, http://www.tomvandyck.com/ kennis Consultatiedocument%20CBFA%20%20-%20 Financial%20Education%20%283%20January%20 2009%29.pdf available], no longer [website Conclusion 94 the rise of consumer society deserving of protection because of their recognized inability to absorb sufficient information at the right moment. At the same time the increasing complexity of financial products hollowed out the mandatory information duties to the point of becoming useless, resulting in an information paradox: consumers can only be considered responsible if they could be brought to stomach a mass of indigestible information. Both governments have put their hopes on financial education to bring consumers to do just that, but the Information Paradigm has fragmented the mass of consumers, once all equal before the law, into numerous special interest groups deserving attention for one reason or another.

Joost Jonker (1955) is neha Professor in Business History at the University of Amsterdam and senior researcher at the International Institute for Social History, Amsterdam. His research interests are the financial and business history from the sixteenth century to the present. Recent publications include: (with Oscar Gelderblom), ‘Financiële zelfredzaamheid in Nederland sinds 1750’, Economisch Statistische Berichten 101 (2016) 244-247; (with Oscar Gelderblom and Clemens Kool), ‘Direct finance in the Dutch Golden Age’, Economic History Review 69 (2016) 1178-1198; (with Heidi Deneweth and Oscar Gelderblom), ‘Microfinance and the decline of poverty, evidence from the nineteenth-century Netherlands’, Journal of Economic Development 39 (2014) 79-110. Email: [email protected].

Michael Milo (1961) is Associate Professor in the history of law and comparative property law at Utrecht University. He is a fellow of the South African Research Chair in Property Law, at the University of Stellenbosch, South Africa. Publications include: ‘Hang naar heden. Over het verleden in het geldende recht’, Ars Aequi (2017) 240-249; (with S. van Kampen, eds.), Recht en armoede (Nijmegen 2016); Goederenrecht (Den Haag 2015). Email: [email protected].

Johan Vannerom (1984) is an attorney at Janson Baugniet Attorneys-at-Law in Brussels, Belgium, and Senior Affiliated Researcher on consumer credit at the University of Leuven. Publications include: J. Vannerom (ed.) M-Commerce (Antwerpen, Cambridge 2017); J. Vannerom en E. Casier, ‘Enkele topics van het vernieuwde hypothecair kredietrecht’, Bank- en Financieel Recht [afl. 1] (2017) 11-41; J. Vannerom, ‘De borg, de consument en de medeschuldenaar. Geen Triniteit, maar dualiteit’ (annotatie onder het arrest HvJ, 14 september 2016, Zaak C-534/15, P. en M. Dumitras), Tijdschrift voor Belgisch Handelsrecht [afl 2] (2017) 190-199. Email: [email protected].