Interim Interest in the APR: The Bank Must Prove Their Indeterminability – Cass. 1st civ., 8 October 2025, No. 23-22.090

Court of Cassation, 1st Civil Chamber, 8 October 2025, No. 23-22.090

I. The APR, a reflection of the true cost of credit: an essential transparency tool

A. The function of the annual percentage rate of charge (APR)

The annual percentage rate of charge (APR), or TEG (which became TAEG – taux annuel effectif global – following the 2016 reform), is the central indicator that enables the borrower to measure the total cost of their credit. Unlike the nominal rate, which reflects only the price of the money borrowed, the APR incorporates all charges made mandatory for obtaining the loan: processing fees, cost of borrower’s insurance (under certain conditions), guarantee fees, brokerage fees where applicable, and all other costs determinable on the date of the offer.

This duty to inform, provided for by the Consumer Code, pursues a dual objective. On the one hand, it enables the borrower to compare different credit offers on a homogeneous basis, by knowing the true cost of the commitment they are about to undertake. On the other hand, it serves as a safeguard against usurious practices, as the APR cannot exceed the usury threshold set quarterly by the Banque de France.

B. Interim interest: nature and significance

Interim interest represents a particular category of costs associated with a mortgage loan. It corresponds to the interest due during the so-called “pre-financing” phase, i.e., the period during which the bank progressively disburses the funds without the borrower having yet begun repaying the principal according to the final repayment schedule.

This situation arises mainly in two scenarios. First, in the case of a purchase off-plan (VEFA, or “achat sur plan”): the funds are released progressively as construction work advances, in accordance with the schedule set out in the sale contract. Second, in the case of a major renovation of a property: disbursements are made progressively, at the pace of work completion, upon presentation of invoices.

During this period, the borrower pays only the interest on the amounts already disbursed, without repaying any principal. This interim interest therefore constitutes a real cost of the credit, which is added to the total amount of future repayments. Their inclusion in the APR appears logical: they are directly related to the financing transaction and weigh on the borrower’s budget.

However, banking practice has long consisted of excluding these costs from the APR calculation, on the grounds that they would not be “determinable” at the time the loan offer was issued. This argument rests on the idea that the exact amount of interim interest would depend on the actual schedule of fund disbursements, which was unknown at the date of contract signature. It is precisely this reasoning that recent case law has come to regulate strictly.

II. The case decided on 8 October 2025: chronology and claims

A. The facts: a mortgage loan and standard grievances

On 24 July 2012, Mr. and Mrs. M. took out a mortgage loan of 138,998 euros with the Caisse d’u00c9pargne et de Pru00e9voyance Loire-Centre, intended to finance the acquisition of a dwelling without renovation work. The contract provided for repayment over 240 monthly installments at a nominal rate of 3.47% per annum. An amendment dated 10 June 2015 subsequently reduced this rate to 2.85% per annum, lowering the monthly payments from 885.07 euros to 779.18 euros (excluding insurance).

Seven years later, on 14 March 2019, the M. spouses summoned their bank before the Commercial Court of Orlu00e9ans. They raised two main grievances. First, they alleged that the institution had calculated the periodic interest on the basis of a “Lombard” banking year of 360 days, instead of the civil year of 365 days, a practice that has the effect of artificially increasing the cost of credit. Second, and this is the central point of the ruling under study, they challenged the omission of the pre-financing period interest from the calculation of the APR and the total cost of the credit.

Accordingly, they sought the application of the legal sanction provided for by the Consumer Code: the substitution of the statutory rate of interest for the contractual rate from the date the loan was taken out, together with an order for the bank to repay all interest paid. On 11 September 2019, the borrowers repaid their loan early, which did not preclude the continuation of the proceedings.

B. The position of the Court of Appeal of Orlu00e9ans

On appeal from the decision of the Commercial Court, the Court of Appeal of Orlu00e9ans issued a ruling on 7 September 2023 that partially upheld the bank’s position. The Orlu00e9ans judges held that the clause excluding interim interest from the APR calculation did not constitute an unfair term within the meaning of Article L. 132-1 of the Consumer Code.

To reach this conclusion, the Court of Appeal noted several factual elements. The loan offer set the due dates on the 5th of each month, with the start of amortization at the first applicable payment date following the disbursement of funds. The credit was intended to finance the acquisition of a dwelling without renovation work, with funds disbursed to the notary responsible for executing the deed of sale.

On this basis, the Court of Appeal declared the M. spouses’ claim for annulment of the interest clause unfounded and dismissed their claim for reimbursement. It further declared certain claims inadmissible on the ground of limitation. Dissatisfied with this outcome, the borrowers filed an appeal in cassation.

III. The reversal: a reinforced standard of proof for the bank

A. The principle: interim interest must be included in the APR

The Court of Cassation begins by firmly restating the applicable principle. By virtue of Articles L. 313-1, L. 312-8, and L. 312-33 of the Consumer Code (in their version applicable to the dispute, prior to the ordinance of 14 March 2016), as well as Article R. 313-1 of the same code, interest and costs due for the pre-financing period are related to the granting of the loan and must be included in the APR calculation.

This principle follows logically from the very purpose of the APR: to reflect the total and true cost of the credit for the borrower. Interim interest does not constitute an incidental or hypothetical expense, but rather a certain cost directly related to obtaining and using the credit. Its exclusion from the APR would have the effect of distorting the borrower’s perception of the overall cost of the transaction.

Article L. 314-1 of the Consumer Code, in its current version, specifies moreover that the annual percentage rate of charge must include all costs “known to the lender on the date the credit offer is issued” or “the amount of which can be determined on that same date,” provided that they “constitute a condition for obtaining the credit or for obtaining it on the terms announced.”

B. The insufficiency of the Court of Appeal’s reasoning

The High Court then overturns the reasoning of the Court of Appeal, which it deems insufficient. Admittedly, the Orlu00e9ans judges found that the loan was intended to finance the acquisition of a dwelling without renovation work, with funds disbursed to the notary. They deduced that the interim interest was not determinable at the time the offer was issued, since their amount depended on the date of authentication set subsequently by the notary.

But for the Court of Cassation, this general assertion does not suffice. The Court of Appeal should have specifically identified the concrete circumstances that would have rendered the amount of this interest indeterminable during the pre-financing period, which was nonetheless of a known and fixed maximum duration of 24 months.

In other words, the Court of Cassation considers that the mere mention of the fact that the authentication date was not set on the date of the offer does not, on its own, demonstrate the impossibility of determining the amount of the interim interest. Other elements should have been investigated: what was the range of possible dates for the final signing? Was the disbursement amount known? Had the parties agreed on a provisional schedule?

In the absence of these factual specifics, the Court of Appeal did not legally justify its decision. The reversal is therefore ordered, but only on this head of the ruling. The case is remitted to the Court of Appeal of Bourges, which will have to re-examine the issue in light of this reinforced reasoning requirement.

IV. Scope of the decision: what this ruling changes for borrowers

A. The burden of proof rests on the lending institution

The major lesson of this ruling lies in the de facto reversal of the burden of proof. If a bank intends to argue that certain costs related to the credit were not determinable on the date of the offer, and therefore that they did not need to be included in the APR, it can no longer content itself with a general assertion. It must provide concrete and specific evidence demonstrating this impossibility.

In practice, the lending institution will need to explain, with supporting documentation, why the amount of interim interest could not be calculated at the time the offer was issued. For example, it may invoke the absence of a provisional work schedule in the context of a complex renovation project, or uncertainty linked to a sale conditional on obtaining administrative approvals. But a mere reference to the later date of signing at the notary’s office will no longer suffice.

This case law follows in the continuity of a notable ruling by the Commercial Chamber of 15 June 2022 (No. 20-16.070), which had already specified that interim interest must be included in the APR “provided that they are determinable at the time the contract is concluded.” The ruling of 8 October 2025 goes further by requiring that this indeterminability be demonstrated, not merely alleged.

B. Practical consequences for challenging an erroneous APR

For a borrower who suspects an APR error related to the omission of interim interest, this decision provides a reinforced litigation tool. They may now invoke, in support of their challenge, the insufficiency of the bank’s reasoning if it merely asserts that these costs were not determinable.

However, the borrower must act within the applicable limitation periods. The action for forfeiture of the right to interest is subject to a five-year limitation period running from the day on which the borrower became aware, or should have become aware, of the alleged irregularity. The Court of Cassation considers that this starting point is the date of acceptance of the offer if the borrower was in a position to detect the irregularity by simply reading the contract.

In practice, challenging the APR can lead to several sanctions. The most common is the forfeiture of the right to interest provided for by Article L. 341-34 of the Consumer Code (formerly L. 312-33). In this case, the contractual rate is replaced by the statutory rate of interest, which is much more favorable, from the inception of the loan. The bank must then reimburse the excess interest collected, calculated as the difference between the interest actually paid and that which would have been due at the statutory rate.

Furthermore, if the clause excluding interim interest from the APR is held to be unfair within the meaning of Article L. 132-1 of the Consumer Code (which requires demonstrating a significant imbalance to the detriment of the consumer), it will be deemed unwritten. The contract will survive in its other provisions, but the disputed clause will be set aside, with the resulting consequences for the APR calculation.

It should also be noted that this case law applies to contracts concluded before the reform of the Consumer Code introduced by the ordinance of 14 March 2016, as in the case at hand. For subsequent contracts, the current provisions (notably Article L. 314-1) adopt the same principles: all determinable costs related to the granting of credit must be included in the APR.

Conclusion

The ruling of the Court of Cassation of 8 October 2025 marks an important step in the protection of borrowers against banking practices regarding APR calculation. By requiring the bank to concretely, and not abstractly, demonstrate the impossibility of determining the amount of interim interest on the date of the offer, the High Court reinforces the transparency requirement that must govern pre-contractual information. This solution reflects a fundamental trend: the consumer must be able to assess, at the time of committing, the true and complete cost of the credit they are taking out. Any clause that would obscure this view, without serious and substantiated justification, is now exposed to judicial censure. For borrowers harmed by an erroneous APR, this heightened judicial oversight opens the way to better-founded claims and, potentially, more frequent condemnations of lending institutions that have failed in their duty to inform.

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