The nature,extent, causes,and consequences of problematic debt situations

The paper reports on the most important and salient results of an investigation which was carried out in the Netherlands in 1980/1981. The object of the research was to establish the actual number of borrowers with a problematic debt situation and to provide an answer to the question of how the problems have arisen and what their consequences are for the borrowers and their families. The research was divided into two parts:

--an investigation of the nature, extent, and causes of problematic debt situations (the survey part)

--an investigation of their consequences (the qualitative part).

In the explanation of how a problematic debt situation comes about, institutional, socioeconomic, personality, and decision-behaviour factors were taken into account. The results of both investigations provide an impetus for policy-makers to modify their policies aimed at preventing problematic debt situations from arising. Some starting points for such a re-orientation are discussed in this paper. The first point relates to the predictability of problematic debt situations and the implementation of an early warning system; the second point relates to the acceptance policy of financial institutions, in particular the use and functioning of credit score systems; the third point suggests restraint in the granting of additional credit to borrowers who have already taken out one or more credit; the fourth point relates to advice which could be provided to improve borrowers' (information-seeking) behaviour and level of knowledge.