Consumer Credit

Consumer Credit

Consumer credit is a loan granted to you by a bank or financial institution to help you purchase something unrelated to your professional activity, such as a computer, a holiday, or a car. You can repay the loan later, either in a lump sum or in instalments, with or without interest or charges.

Which transactions do not benefit from the protective regime of consumer credit?

Not all credit transactions are subject to the same rules. For example, loans of less than 200 euros or more than 75,000 euros, loans to purchase a property, authorised overdrafts repayable within one month, and debt repayment plans negotiated with your creditors are not considered consumer credit (C. consom., art. L. 312-1 to L. 312-4).

Can you choose to subject your contract to the protective regime of consumer credit?

Yes, you may agree with the lender to apply the consumer credit rules to your contract, even if it would not normally be subject to them, provided that your choice is clear and unambiguous (Civ. 1re, 9 March 2022, No. 20-20.390).

What are the different types of consumer credit?

There are four main types of credit: standard loans (which may or may not be linked to a specific purchase), revolving credit (C. consom., art. L. 312-64 et seq.), overdrafts (C. consom., art. L. 312-84), and financial leases, which are rental agreements with a purchase or sale option at the end (C. consom., art. L. 312-2). Sometimes it is not easy to determine whether a transaction constitutes credit. For example, it has been held that the purchase of a mobile phone with a telephone plan, which increases the monthly subscription price, constitutes credit (Com. 7 March 2018, No. 16-16.645).

What are the lender’s obligations regarding advertising and pre-contractual information?

Any advertisement that mentions an interest rate or figures relating to the cost of the credit must include certain prescribed information (C. consom., art. L. 312-6).

Before signing the credit agreement, the lender must provide you, in writing or on another durable medium, with the information necessary to compare different offers (C. consom., art. L. 312-12), assess your repayment capacity (C. consom., art. L. 312-16), and explain whether the proposed credit agreement is suited to your needs and financial situation (C. consom., art. L. 312-14).

How is the consumer credit agreement formed?

The credit agreement offer, which must remain open for at least fifteen days, is drawn up in writing or on another durable medium and provided or sent in as many copies as there are parties (C. consom., art. L. 312-18).

You may withdraw without giving any reason within fourteen days from the date you accept the credit agreement offer (C. consom., art. L. 311-12).

For a period of seven days from your acceptance of the agreement, no payment may be made by the lender to you or on your behalf, nor by you to the lender (C. consom., art. L. 312-25).

Revolving credit, which gives you the option to draw down the granted credit amount in instalments at dates of your choosing, is subject to enhanced formal requirements due to its associated risks (C. consom., art. L. 312-57 et seq.).

What must the consumer credit agreement contain?

The credit agreement must be drawn up in writing or on another durable medium (C. consom., art. L. 312-28) and must contain certain mandatory information (C. consom., art. R. 312-10), including in particular the terms for calculating the withdrawal period.

How is the consumer credit agreement performed?

You may always, on your own initiative, make early repayment of all or part of the credit granted to you. Subject to certain exceptions, a penalty not exceeding 1% of the credit amount may be charged when the early repayment amount exceeds 10,000 euros over a twelve-month period (C. consom., art. L. 312-34 and D. 312-15).

In the event of non-payment on your part, the lender is required to inform you that you may be required to immediately repay the outstanding principal, plus unpaid interest (C. consom., art. L. 311-22-2 and L. 311-24), and a possible penalty equal to 8% of the outstanding principal as of the date of non-payment (C. consom., art. D. 312-16).

With the exception of hire-purchase and lease-purchase agreements, the lender is required to inform you at least once a year of the amount of outstanding principal remaining to be repaid (C. consom., art. L. 311-25-1), which becomes a monthly requirement in the case of revolving credit (C. consom., art. L. 312-71).

Linked credit — credit used exclusively to finance a contract for the supply of specific goods or the provision of specific services (C. consom., art. L. 311-1, 9) — is subject to a special regime, whereby your obligations only take effect from the delivery of the goods or the provision of the service (C. consom., art. L. 312-44 to L. 312-51 and D. 312-8 to D. 312-118).

What are the penalties for non-compliance with consumer credit formalities?

A lender who fails to comply with the prescribed formalities forfeits the right to claim interest from you and is liable to a fine of 1,500 euros in the cases listed (C. consom., art. L. 341-1 et seq.).

Which court has jurisdiction in consumer credit disputes?

Since 1 January 2020, consumer credit disputes are decided by the consumer protection judge (COJ, art. L. 213-4-1 and L. 213-4-5). Payment actions brought against the borrower must be filed within two years of the event giving rise to them, failing which they will be deemed inadmissible (C. consom., art. R. 312-35).