Age Discrimination in Lending: Insights from German Research
Explore the research project on age discrimination in lending from a German perspective, including findings on difficulties in credit access, causes of discrimination, and proposed solutions. Gain insights into issues faced by the elderly in lending practices, such as refusal of credit applications and problems related to digitalization and debt restructuring.
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Age discrimination in lending German perspective Dr. Duygu Damar-Blanken, Institute for Responsible Finance 1st European Conference of the International Association of Consumer Law 17 September 2024
Research Project Funded by the German Federal Anti-Discrimination Agency (Antidiskriminierungsstelle des Bundes) Difficulties in acces to credit Goals of the project Find out in what way the age discrimination is manifested in lending practice Ascertain the reasons for age-related differentiations in lending practice Propose solutions 2 Dr. Duygu Damar-Blanken, Institute for Responsible Finance 12.09.2024
Design Preliminary study Analysis of current & upcoming legal regulations Expert interviews (Anti-discrimination counseling centers, consumer counseling centers, banks, credit intermediaries) Main study Surveys among banks, consumer counseling centers & anti-discrimination counseling centers Potential solutions Concluding workshop ? with all relevant stakeholders Publication of the project report on September 14th, 2023 ? available on https://www.iff-hamburg.de/wp- content/uploads/2023/09/ADS-Abschlussbericht.pdf (in German) 3 Dr. Duygu Damar-Blanken, Institute for Responsible Finance 12.09.2024
Age discrimination in lending practice Unofficial (oral) prevention of credit application by consumers Refusal of the credit application Problems due to increasing digitalisation, esp. branch closings Problems regarding debt restructuring Credit advertising Sale of additional services, eg residual debt insurance Credit conditions Problems relating to credit processing Negligent creditworthiness assessment 0% 10% 20% 30% 40% 50% 60% Relevance to elderly Complaints about credit Source: Survey among consumer and anti-discrimination counseling centers, N = 23. Question: To which of the following topics relate the complaints of the elderly seeking counsel regarding lending? (Multiple answers possible) 4 12.09.2024
Causes of age discrimination in lending Decreased income due to retirement Duration of the credit exceeds the statistical life expectancy Increased risk of care dependance Condition of total repayment until a certain age Dependence on ADM systems Prevention of the credit application due to the false assumtion that the consumer is too old Legal uncertainty regarding due diligence obligation in creditworthiness assessment Standardised creditworthiness assessment Refraining from credit application due to the false belief that an elderly person anyway do not obtain credit Increased household costs 0% 10% 20% 30% 40% 50% 60% General Consumer Credit Mortgage Total Source: Survey among consumer and anti-discrimination counseling centers, N = 23. Question: Which of the following do you identify as causes for age-related discrimination in lending? (Multiple answers possible) 5 12.09.2024
German Equality Act (GEA) Sec. 19 GEA Prohibition of discrimination in private law contracts Para. 1 Insurance contracts Bulk transactions and similar transactions ? legal transactions that are typically concluded in a large number of cases under comparable conditions without any regard to the person, or where the regard to the person is of subordinate significance Racist discrimination & discrimination based on ethnic background, sex, sexual orientation, age, disability Para. 2 Access to and supply of goods and services which are available to the public, including housing Racist discrimination & discrimination based on ethnic background Credit contracts para. 1 or 2? Creditworthiness assessment ? due regard to the person? 6 Dr. Duygu Damar-Blanken, Institute for Responsible Finance 12.09.2024
Creditworthiness assessment = Credit decision? General consumer credit Mortgage Total 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Solely on the result of the creditworthiness assessment, personal characteristics play no role Essentially on the result of the creditworthiness assessment; however, certain personal characteristics are also taken into account Source: Bank survey, N = 100. Question: Is a credit decision by a mortgage or general consumer credit is based, in addition to the result of the creditworthiness assessment, on personal characteristics, e.g. if a person is trustworthy or confrontational? 7 Dr. Duygu Damar-Blanken, Institute for Responsible Finance 12.09.2024
Personal characteristics Consultancy need Resistence to consultation Friendliness Civility Acquaintance Experience with or knowledge of credits Confrontational personality Understanding capacity Difficulties in communication Trustworthiness 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 General consumer credit Mortgage Total Source: Bank survey, N = 46. Question: Which personal characteristics, in addition to the result of the creditworthiness assessment, are taken into account for a credit decision? (Multiple answers possible) 8 Dr. Duygu Damar-Blanken, Institute for Responsible Finance 12.09.2024
Proposed solutions I Branch closings ? state level ? savings banks (Sparkasse) ? public law institutions which operates as private law entities Sale of additional services, esp. residual debt insurance ? Adjustment of the regulatory framework for credit securities ? meanwhile a 7-days cooling-off period has been adopted Refusal of credit application due to age limits & unofficial prevention of credit application ? direct discrimination Explicit provision regarding credit contracts under sec. 19 para. 1 GEA Repeal of the gradual protection ? protection should be extended to all contracts regarding access to and supply of goods and services which are available to the public for all protected grounds (including age) 9 Dr. Duygu Damar-Blanken, Institute for Responsible Finance 12.09.2024
Proposed solutions II Justification by a legitimate aim ? Sec. 20 GEA ? case-based examination National regulation which incorporates principles and guidelines on the creditworthiness assessment Implementation of the new Consumer Credit Directive Regulation should offer framework for age related issues, such as the regular income from occupational activity by choice consideration of statistics 10 Dr. Duygu Damar-Blanken, Institute for Responsible Finance 12.09.2024
Thank you for your attention! institut f r finanzdienstleistungen Grindelallee 100 20146 Hamburg www.iff-hamburg.de institut@iff-hamburg.de Dr. Duygu Damar-Blanken duygu.damar@iff-hamburg.de 11 12.09.2024
