The commissions seem to be recommending such timely relief in more and more cases.  From 2001 to 2004, the proportion of cases in which the commissions recommended “extraordinary” global payment delays rose from about 10% to about 13%.  Over the same period, the percentage of these cases in which the commission ultimately recommended discharge of debt rose from about 18% to about 30%.   Moreover, in the first several months of availability of the new “personal recovery” procedure, the commissions have diverted about 14% of all administered cases to that new process.   The French system seems to be moving in the “right” direction to overcome hyperbolic discounting, albeit at a carefully moderated pace.

3.  Benelux

The newest consumer debt relief laws on the European continent minimize the negative effects of hyperbolic discounting more effectively.  Under Luxembourg’s new law on collective consumer debt regulation, in force since October 2001, court-imposed payment plans cannot exceed seven years, though in practice many plans are concluding in three or fewer years.   The Belgian and Dutch laws also offer only mildly delayed gratification.  Belgian plans can delay relief for debtors for only between three and five years—down from a maximum of seven years in the early draft law.   In the Netherlands, a long tradition of voluntary plans had established three years as the standard period for payment demands and delayed relief for consumers.   Now, the new Dutch Wet schuldsanering natuurlijke personen (Law of Debt Rehabilitation of Natural Persons), codified in the Bankruptcy Act and in force since December 1998, extends that tradition by limiting court-imposed plans to three years.   The recent trend in Europe seems to be reducing the length of payment plans.  Behavioral economics lends one more argument to support this trend:  reducing the effects of hyperbolic discounting maximizes the educational potential of a shorter but more meaningful period of ceded income.   

C.  Local Legal Culture Fosters Feelings of “Unfairness”

If the demands of payment plans from area to area fluctuate widely, individuals are likely to resist such “unfair” variations in treatment.  In the democratic societies of the United States and Europe, equal treatment for all is the “norm” against which consumers will undoubtedly measure “fairness.”  Even if different debtors receive slightly different treatment, if an objective standard applies to all, debtors are more likely to feel that their experience with the system was “fair.”  If the demands of plans vary from district to district based apparently on nothing more than geography, debtors and non-debtors alike are likely to view the system as “unfair.”  This again is likely to produce consumer antagonism, loss of respect, and a conclusion that the system represents an untrustworthy source of education and social guidance.  Unfortunately, most of the European systems seem to be falling into this trap of excessive “discretion” and unequal treatment of debtors.