Consumer credit: bank obligations

Before signing the contract, the lender (i.e. the bank or credit institution) must provide you with information on whether the credit is suitable for your needs and financial situation.

The lender must obligatory provide you with a pre-contractual information sheet that includes the following:

• Identity and address of the lender
• Type of credit
• Amount of credit and conditions for making available the amount borrowed
• Contract duration, number and timing of refunds (per month, every 2 months...))
• Total amount due
• Total cost of fees, expressed as a specific amount
• (TAEG) (except in case of lease with purchase option), with an explanation of how this rate is calculated (expressed as a percentage of the amount borrowed)
• Compensation to be paid in the event of late payment
• Existence of a withdrawal period (you have 14 calendar days to waive your credit after signing the contract)
• Articles of the Consumer Code on the period of validity of the offer and on the minimum period of reflection
• Your right to obtain, upon request and free of charge, a copy of the credit agreement offer
• In the case of an appropriated appropriation, the financed good or service.

When the credit is offered at a place of sale, the lender must ensure that you receive all these explanations in a complete and appropriate manner, on the spot, and under conditions guaranteeing the confidentiality of exchanges.

Before granting you credit, the lender must check your creditworthiness, i.e. your ability to repay, to avoid a risk of over-indebtedness.

In particular, he may require the following documents:

• Any proof of address
• Any proof of income
• And any proof of your identity.

The lender also consults the Banque de France files to verify that you are not registered for multiple payment incidents (for example, overdraft abuse, unrefunded credit).

The bank is obliged to offer you a TAEG, which does not exceed the rate of wear.

The rate of wear is the maximum interest rate that the lender has the right to apply to a loan, at the time it is granted. It is set quarterly by the Banque de France, and varies according to credit type, the amount borrowed and the term of loan.

The TAEG is the total cost you have to pay to get the credit. It includes, in particular, the following costs:

• Bank interest, calculated on the basis of the actuarial rate
• Application fees (paid to the bank)
• Fees paid to intermediaries (for example, a broker)
• Cost of mandatory borrower insurance (whether it is bank or other company insurance)
• All other fees charged to obtain the credit, such as account maintenance fees if the bank requires the opening of an account to grant the loan.

By checking that the TAEG does not exceed wear rate, the bank shall comply with a legal obligation to protect yourself against abusive lending conditions.

It exists different rates of wearbased on the amount borrowed and the term of the loan.

The lender may ask you to take out borrower insurance. This insurance covers your monthly payments in the event of a payment incident on your part.

If insurance is required, the lender must:

• inform you of the standard cost of insurance,
• and give you an example of a price charged by an insurer, expressed as a specific amount per month.

The lender can offer you a contract with a partner insurer. However, you remain free to choose another insurer for your credit, provided that the contract has a level of guarantee equivalent to that required by the lender.

The lender must clearly identify all ancillary credit-related charges (e.g., administration fees, prepayment fees, payment incident intervention fees). It must also specify whether borrower insurance is mandatory or optional.

The lender must maintain the conditions indicated on its loan offer for a minimum period of 15 calendar days.

You can accept and return this offer during this period.

After 15 days, if you still haven't signed, the lender can change their offer (increase the interest rate for example).

The lender must inform you of your right to prepay all or part of your credit. He must also tell you the conditions and any associated costs.

Early repayment is always possible, except for revolving loans where specific restrictions may apply.

No early redemption indemnity may be required in the following cases:

• If the early repayment is made in execution of an insurance contract intended to guarantee the credit (for example, in the event of death or invalidity),
• If it occurs at a time when the interest rate applied is not fixed,
• Or in case of overdraft authorization.

Apart from these cases, if early redemption allowances (IRA) are provided for, they must be mentioned in the contract and comply with the statutory ceilings:

• 1% of the amount refunded if the remaining term of the credit exceeds 1 year.
• 0,5 % of the amount refunded if the remaining term of the loan is less than 1 year.

The lender is entitled to claim compensation only if the total amount of prepayments made over a 12-month period exceeds €10,000.

Finally, after an early repayment, the lender must recalculate the total amount outstanding, deducting the unaccrued interest, i.e. those which would have been paid out of the remaining monthly payments.

The lender must also tell you what to do in case of disagreement or problem with the credit agreement.

The lender must have a dedicated service to deal with borrowers' claims. Contact details for this service must be included in the contract.

If the dispute persists, the lender must provide you with the contact details of an independent mediator. This remedy is free of charge.

Complaints must be processed within 2 months maximum.

If mediation fails, the lender must inform you of the possibilities of bringing the matter before the competent courts.

To be helped in your steps, you can call on a consumer association or to a lawyer if legal action is contemplated.