Taking out a mortgage is often the project of a lifetime. The opacity that has long characterised this sector has led the legislator, in particular via mortgage reform and your rightsThe aim is to impose strict rules to protect borrowers. Advertising and pre-contractual information are at the heart of these protective measures.
Rules governing mortgage advertising
Advertising for home loans is strictly regulated by articles L. 313-3 to L. 313-5 of the French Consumer Code. These provisions are designed to ensure that consumers are not lured by tempting but incomplete or misleading offers.
All advertising for a home loan, regardless of the medium, must be clear, accurate and not misleading. It must state the identity of the lender (or intermediary) and the nature and purpose of the loan. When it includes an interest rate or figures relating to the cost of the credit, article L. 313-4 requires additional information to be presented in a clear, concise and visible manner, often using a representative example:
- The borrowing rate (fixed, variable, revisable) and the charges included in the total cost of credit.
- The total amount of credit.
- The Annual Percentage Rate (APR), a key indicator of total cost. If insurance is compulsory and its cost cannot be determined in advance, this obligation must be mentioned with the APR.
- The term of the credit agreement.
- The total amount owed by the borrower.
- The amount and number of instalments.
- A currency risk warning if the loan is in a foreign currency.
- Whether a mortgage or similar guarantee is required.
Case law severely punishes misleading practices. For example, equating monthly repayments with rent is prohibited (Crim. 4 July 1990, no. 89-85.766), as it can distort the borrower's perception of the real financial effort involved.
Similarly, article L. 313-5 2° prohibits any wording likely to create "false expectations on the part of the consumer regarding the availability or cost of credit". Failure to comply with these rules exposes the professional to penalties, including a fine of up to 150,000 euros (article L. 341-21).
General information due to the borrower
Even before any personalised approach, the creditor or intermediary must ensure that clear and comprehensible general information on credit agreements is available at all times (article L. 313-6 of the French Consumer Code).
This information, detailed in article R. 313-3, must be easily accessible and free of charge (on paper or on a durable medium). It covers a broad spectrum:
- Identity and address of the professional.
- Nature, purpose and possible duration of loans.
- Types of rates offered (fixed, variable, etc.) and their implications.
- Possible forms of security (mortgage, guarantee, etc.).
- Foreign exchange risk warning for foreign currency loans.
- A representative example including APR, total cost, etc.
- Indication of any other costs not included in the APR.
- Possible repayment terms.
- Conditions for early repayment.
- The possible need for a property valuation and its cost.
- Possible obligation to take out ancillary services (such as insurance) and the possibility of choosing them elsewhere.
- General warning of the consequences of non-compliance.
Standardised information sheets (FISE): personalised information
At the heart of the pre-contractual information system is the European Standardised Information Sheet (ESIS). Under article L. 313-7 of the French Consumer Code, it must be provided free of charge to the borrower, on a durable medium, no later than when the offer of credit is issued.
FISE provides personalised information tailored to the borrower's situation and the characteristics of the loan being considered. Its purpose is to enable an informed comparison of the different offers available on the market and to assess the implications of each proposal. Its content, which is strictly defined by article R. 313-4 and a regulatory appendix, incorporates and customises the general information, adding specific details such as an indicative repayment schedule where relevant.
For variable rate or foreign currency loans, the FISE must include specific simulations illustrating the potential impact of rate or exchange rate variations on repayments, term and total cost (articles R. 313-5 and R. 313-6).
Submission of the FISE is an essential obligation. If it is not provided, or if it is incomplete or incorrect, the lender may forfeit all or part of the right to interest, depending on the seriousness of the breach (article L. 341-26). The mere mention in the loan offer that the FISE has been provided is not sufficient to prove compliance with this obligation; the lender must be able to demonstrate this by other means if necessary (Civ. 1re, 7 June 2023, no. 22-15.552). See find out more about FISE and the lender's duty to warnSee our dedicated article.
Specific information on loan insurance
Although not legally obligatory, creditor insurance is almost always required by lenders and represents a significant proportion of the total cost of credit. Information on this subject is therefore vital.
Article L. 313-8 of the French Consumer Code requires that any pre-contractual document setting out the cost of group insurance (offered by the lender) must specify its cost in three ways:
- In Annual Percentage Rate of Insurance (APR), for comparison with the APR of the loan.
- Total amount in euros owed over the term of the loan.
- In euros per period (e.g. per month), indicating whether this cost is in addition to the credit instalment.
In addition, a standardised information sheet specific to insurance must be provided as soon as the first simulation is carried out (article L. 313-9). It details the cover offered, the minimum cover required by the lender, and explicitly states the borrower's right to choose another insurer (delegated insurance), provided that the external contract offers an equivalent level of cover (article L. 313-30).
Recent legislation, notably the Lemoine Act of 2022, has considerably strengthened the rights of borrowers in terms of insurance, making it easier to cancel and replace insurance contracts, and improving access to credit for people with aggravated health risks thanks to the development of the "right to be forgotten".
The annual percentage rate of charge (APR): the key cost indicator
The APR is the essential tool for comparing the real cost of different credit offers. Its definition (article L. 311-1 7°) and method of calculation (articles L. 314-1 to L. 314-4 and R. 314-1 et seq.) are precise. It must include all any charges known to the lender that are a condition of granting credit or obtaining credit on the stated terms.
Article R. 314-4 lists the main elements included in the APR:
- Application fees.
- Fees paid or due to intermediaries (brokers, etc.).
- The cost of compulsory insurance and guarantees.
- The cost of opening and maintaining a specific account if required for the loan.
- The cost of valuing the property (appraisal), if applicable.
However (article R. 314-5), costs relating to the acquisition itself (notary fees, registration fees) and penalties for failure to meet contractual obligations are excluded.
Case law gives a broad interpretation of the costs to be included. For example, the contribution to a mutual guarantee fund required as a condition of the loan must be included in the APR (Civ. 1re, 9 December 2010, no. 09-67.089).
The accuracy of the APR is fundamental. An error or omission in calculating the APR or mentioning it in the loan offer is punishable by forfeiture of the right to interest for the lender, in proportion to the loss suffered by the borrower (article L. 341-4 and established case law, e.g. Civ. 1re, 22 September 2021, no. 19-25.316).
The lender's duty to warn
In addition to simply providing information, lenders (and intermediaries) have a duty to warn borrowers. This duty, enshrined in article L. 313-12 of the Consumer Code, requires professionals to warn borrowers free of charge "when, in view of their financial situation, a credit agreement may entail specific risks for them".
This duty goes further than providing advice: it involves drawing attention to the potential dangers of the proposed transaction (risk of over-indebtedness, complexity of the package, etc.). It follows directly from the creditworthiness assessment that the lender must carry out (article L. 313-16). If this assessment reveals a risk of excessive indebtedness or that the loan is unsuited to the borrower's situation, the lender must not only warn the borrower but potentially refuse the credit.
Failure to comply with this duty to warn is punishable under civil law by forfeiture of the right to interest (up to a limit of 30% and capped at €30,000, article L. 341-27) and under criminal law (article L. 341-31).
All these obligations to provide information, transparency and warnings are designed to rebalance the relationship between the professional and the borrower, who is often less well informed. The complexity of credit products and the size of the financial commitment justify this protective formalism. If you have any questions about a loan offer or if you think your rights have not been respected, our lawyers advise you on mortgages.
Sources
- Consumer Code: articles L. 313-3 to L. 313-12, L. 313-16, L. 313-29, L. 313-30, L. 314-1 to L. 314-5, L. 341-4, L. 341-21 to L. 341-27, L. 341-31, R. 313-3 to R. 313-10, R. 314-1 to R. 314-7
- Order no. 2016-351 of 25 March 2016 on consumer credit agreements relating to immovable property for residential use
- Law no. 2022-270 of 28 February 2022 for fairer, simpler and more transparent access to the loan insurance market
- Case law cited (main rulings) :
- Crim. 4 July 1990, no. 89-85.766 (Advertising)
- Civ. 1st, 9 December 2010, no. 09-67.089 (Calculation of APR)
- Civ. 1st, 22 September 2021, no. 19-25.316 (Penalty for incorrect APR)
- Civ. 1re, 7 June 2023, no. 22-15.552 (Proof of delivery FISE)
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