By Charlotte GAUCHON
22 March 2025
The Total Effective Rate (TEG) is often at the heart of disputes between borrowers and banks. Case law has changed considerably in recent years, altering the balance between protecting borrowers and ensuring the legal certainty of loan contracts. Changes in civil penalties Historically, the courts declared the interest clause null and void if the TEG was missing or incorrect. This radical sanction allowed the legal rate to be substituted for the contractual rate. Case law has gradually evolved towards a more proportionate approach. The Court of Cassation has held that «the indication of an erroneous TEG is equivalent to the absence of a TEG» (Cass. 1re civ., 16 October 2013, no. 12-18.190). But it has also held that the penalty should be tailored to the actual harm suffered by the borrower. Order no. 2019-740 of 17 July 2019 formalised this change by introducing a single penalty: forfeiture of the right to interest in a proportion set by the court.
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