Credit law governs transactions whereby a lender makes a sum of money available to a borrower, with the latter being required to repay it, usually with interest, on an agreed date. Presented in this way, it looks simple. But it is not. French law has never brought it together in a single code: it has split it between two different approaches - one that governs lenders, in the Monetary and Financial Code, and one that governs contracts and protects the borrower, in the Consumer Code - to which are added the Civil Code for the general law of lending and the case law of the Cour de cassation, which has shaped most of the rules applicable to banker liability.
This dispersal is no accident. It expresses a constant tension in French law: encouraging credit as a driver of economic activity while protecting borrowers - whether unsophisticated individuals or professionals - from excessive debt. This guide sets out this dual rationale, presents the players authorised to lend, lists the main categories of credit, details the obligations incumbent on professional lenders and reviews the contentious areas in which credit cases are won or lost.
A subject that straddles two codes
Credit law is based primarily on the Monetary and Financial Code. It defines credit transactions, restricts them to authorised institutions and organises the supervision of the system. Article L. 313-1 gives the broadest definition: a credit transaction is any act by which a person acting for valuable consideration makes funds available or promises to make funds available to another person, or enters into a signed commitment such as an endorsement, a guarantee or a warranty in the interest of that other person. This definition covers not only traditional loans, but also leasing, factoring, discounting and any form of commitment by the banker that is economically equivalent to financing.
«A credit transaction is any act by which a person acting for consideration makes funds available or promises to make funds available to another person or enters into a signed commitment in the latter's interest, such as an endorsement, surety or guarantee. Leasing and, more generally, any rental transaction with an option to purchase are treated as credit transactions. Article L. 511-5 restricts these transactions to authorised credit institutions and finance companies.
The Monetary and Financial Code therefore governs the players involved: who can lend, under what conditions, and under what supervision. But it does not govern the content of contracts. That is the role of the Consumer Code, Books III and VII of the Code govern consumer credit law: consumer credit (articles L. 312-1 et seq.), home loans (articles L. 313-1 et seq.), debt consolidation, over-indebtedness and the FICP repayment incident file. This code is a real code of protection: it imposes standardised pre-contractual information, a withdrawal period, a creditworthiness check, a framework for interest rates and formidable civil penalties - forfeiture of the right to interest, nullity of stipulations, damages - when the lender deviates from it.
Le Civil Code plays the role of common law for loans. Articles 1892 et seq. define loans for use and consumer loans, article 1905 establishes the principle of interest-bearing loans, and article 1907 requires the interest rate to be fixed in writing. Since Ordinance no. 2021-1192 of 15 September 2021, it has also included the general law on sureties (articles 2288 et seq.), which has now been unified and stripped of the scattered provisions that previously populated the Consumer Code and the Commercial Code. Above these texts, European Union law imposes a harmonised framework: Directive 2008/48/EC on consumer credit, Directive 2014/17/EU on real estate credit and Directive 2023/2225 (CCD2), which must be transposed by 2026 and which extends the scope of consumer credit to short overdrafts and fractional payments.
Credit players
Not everyone is allowed to lend in France. Article L. 511-5 of the French Monetary and Financial Code reserves the right to carry out credit transactions on a regular basis to lending institutions and finance companies approved by the’Autorité de contrôle prudentiel et de résolution. Universal banks fall into the first category; they receive funds from the public and grant credit. Finance companies, created in 2014 when European law was transposed, are authorised to lend but cannot collect savings from the public. They include leasing companies, companies specialising in consumer credit and most of the financing subsidiaries of manufacturers and distributors.
Around these central players gravitate the intermediaries in banking and payment services (IOBSP), These brokers are subject to registration with ORIAS and to specific information and advice obligations. The payment institutions and electronic money institutions, In addition, there are the banks, which can now grant short-term ancillary loans. And, on the fringes, players in the field of participative financing (crowdlending), who benefit from an exception to the banking monopoly but remain governed by a specific status.
Le banking monopoly Violation of the monopoly is punishable under article L. 571-3 of the French Monetary and Financial Code (three years' imprisonment and a fine of €375,000). The civil consequences are less obvious - case law considers that the nullity of the contract is not the ordinary law sanction for breach of the monopoly - but the breach may give rise to an action for unfair competition and expose the lender to administrative sanctions. The loans between individuals remains free as long as it is not habitual: an isolated loan between close relations, formalised by an acknowledgement of debt, does not fall under the monopoly. The guide to loans between private individuals details the boundary, which is fragile in practice, between occasional lending and habitual activity.
Above this level, the ACPR supervises the financial soundness and commercial practices of institutions; the Banque de France maintains the national register of personal credit repayment incidents (FICP), investigates cases of overindebtedness and publishes usury thresholds. European Central Bank supervises the major institutions in the eurozone as part of the Single Supervisory Mechanism. The superposition of these authorities produces a credit law where prudential regulation, consumer protection and the control of market practices coexist without always meeting.
Types of loans
Credit law does not treat all financing in the same way. The applicable regime depends both on the nature of the borrower - individual or professional - and the purpose of the credit. There are four main types of credit.
Le consumer credit covers loans of between €200 and €75,000 granted to private individuals for non-business use, other than to finance property. It includes personal loans, whether or not they are assigned to a specific purpose, revolving credit, leasing with a purchase option, overdrafts tacitly granted for more than one month and, since the CCD2 directive, instalments. Its rules, codified in articles L. 312-1 et seq. of the French Consumer Code, are among the most stringent in French law: compulsory pre-contractual information via a European Standardised Information Sheet (FISE), prior assessment of creditworthiness, a fourteen-day cooling-off period, the right to early repayment, strict supervision of canvassing, and a ban on non-compliant «free credit offers». Visit guide to consumer credit takes a closer look at the civil penalties to which a lender who ignores these rules is exposed.
Le mortgage loan, governed by Articles L. 313-1 et seq of the Consumer Code since the Order of 25 March 2016 transposing the MCD directive, follows a parallel but even more protective logic. Mandatory offer, European standardised information sheet (FISE), incompressible ten-day cooling-off period for the borrower, legal conditions precedent, regulated right to early repayment, borrower's insurance untied from the loan contract since the Lagarde Act and then the Lemoine Act. Visit guide to mortgages explains the mechanics of the loan offer and the pitfalls to avoid when signing.
Le business credit, Whether it takes the form of an investment loan, a short-term credit line, leasing, factoring or discounting, credit is essentially outside the scope of the Consumer Code. It is governed by ordinary contract law, banking practice and case law relating to the liability of the banker granting credit. Protection is more limited, but it does exist: case law has extended the duty to warn to uninformed managers and to uninformed borrowers, and article L. 313-12 of the French Monetary and Financial Code requires that sixty days' notice be given before an open-ended bank loan granted to a company is terminated.
Alongside these three major groups, the loans between individuals is still governed solely by the provisions of the French Civil Code - articles 1892 to 1914. No pre-contractual information, no cooling-off period, but strict rules of evidence: a loan of more than €1,500 must be proven in writing, and practice recommends an acknowledgement of debt registered with the tax authorities. The acknowledgement of debt is the cardinal tool for securing these operations.
The obligations of the professional lender
Professional lenders are not free. They are bound by a combination of legislation and case law, and failure to comply can result in severe civil penalties. There are four main obligations.
The first is the’pre-contractual information. The French Consumer Code requires the lender to provide the borrower with a European Standardised Information Sheet (FISE) before signing the contract. The FISE details the total cost, interest rate, repayment terms, ancillary charges and the consequences of defaulting on the loan. This information is not just a document to be initialled: it is a condition of the validity of the borrower's consent. Failure to provide this information, or its inaccuracy, exposes the lender to partial or total forfeiture of the right to interest, a severe penalty that transforms a profitable loan into a simple cash advance.
The second is the credit check. Before granting credit, the lender must consult the FICP and check that the borrower has the necessary resources to repay the loan. This assessment, which must be based on objective and documented elements, has become a systematic point of control for the courts. A poorly prepared application - income not verified, expenses reduced, debt ratio allowed to exceed limits - weakens the bank's position in court when the borrower subsequently challenges the legality of the loan.
The third, and most formidable, is the duty to warn. Developed by case law from the 2000s onwards, it requires bankers who grant credit to uninformed borrowers - i.e. customers whose profession or experience does not allow them to assess the risk of the transaction on their own - to warn them of the risk of excessive indebtedness arising from the credit. The obligation extends to uninformed guarantors. In a landmark decision, the Court of Cassation ruled that a bank that does not demonstrate that it warned the borrower is liable if, at the time the credit was granted, the risk of excessive debt was present (Cass. com., 15 November 2017, no. 16-16.790). The breach gives rise to a claim for damages assessed on the basis of the loss of the opportunity not to have entered into the contract.
An uninformed borrower's liability action against his banker is time-barred after five years, but the starting point is not the conclusion of the loan: it runs from the date of the first payment incident that is not rectified (Cass. 1re civ., 5 January 2022, no. 20-17.325). This rule opens up a much longer litigation window than is often thought and, in practice, means that the duty to warn can be raised several years after the loan is signed - at the precise moment when the bank starts proceedings.
The fourth is the’rate framework. The Consumer Code requires a written reference to the annual percentage rate of charge (APR), which must include all the charges imposed on the borrower in addition to the nominal interest alone. Beyond that, the rate is capped by the wear threshold, The penalty for exceeding this rate is a criminal offence. Under the case law prior to the Ordinance of 17 July 2019, an inaccurate APR opened the way for the legal rate to be substituted for the contractual rate; since the Ordinance, the penalty has been more measured - it presupposes actual harm to the borrower - but the argument is still regularly raised before the courts.
Borrower protection
In addition to the lender's obligations, credit law recognises a series of protective rights for individual borrowers, making it one of the most regulated areas of French private law.
Le cooling-off period is undoubtedly the best known. In the case of consumer credit, the borrower has fourteen days from the date of acceptance of the offer to withdraw without giving any reason and free of charge (article L. 312-19 of the French Consumer Code). In the case of home loans, the mechanism is different: the borrower does not withdraw, but has a period of fourteen days from acceptance of the offer to do so. cooling-off period ten days during which he cannot accept the offer, which amounts to the same result - securing consent against impulse buying.
Le right to early repayment is guaranteed by law for loans to individuals. The lender may provide for compensation, subject to a ceiling set by the Consumer Code, but may not refuse early repayment or penalise early repayment in excess of the ceiling. For home loans, the compensation cannot exceed six months' interest at the average rate for the loan, up to a limit of 3 % of the outstanding capital.
L'loan insurance, For a long time, insurance was de facto imposed by the bank, which linked its loan offer to its insurance policy, but a succession of reforms has gradually untied it from credit. The Lagarde Act of 2010 established the principle of insurance delegation; the Hamon Act of 2014 made it possible to change insurance during the first year; the Bourquin Act of 2017 extended this possibility to each anniversary date; the Lemoine Act of 28 February 2022 completed the movement by allowing borrowers to change their insurance at any time and by abolishing medical selection for most home loans of less than €200,000 repaid before the borrower's sixtieth birthday. Today, this is one of the most effective ways of saving money for households with home loans.
Finally, the’annual information from the guarantor, Under the 2021 reform of the French Civil Code, articles 2302 et seq. require professional creditors to inform guarantors every year of the amount of the principal and ancillary costs of the guaranteed debt. Failure to provide this information results in forfeiture of the right to interest and penalties that have accrued since the previous notification. The penalty is mechanical and systematic: any application for a guarantee on an old loan must begin with an audit of compliance with this obligation, which is often enough to extinguish a substantial part of the claim.
Credit litigation
Credit litigation is not won on the basis of broad principles; it is won on the basis of a detailed understanding of formal obligations. The majority of cases handled by a credit law firm are structured around five areas.
La forfeiture of term is the first step in almost all debt collection procedures. Before the bank can immediately claim the full amount of the outstanding principal, it must declare that the loan has lapsed - a unilateral decision whereby it considers that the debtor's failure to perform gives it the right to demand immediate repayment. The Court of Cassation has set a strict framework for this mechanism: unless there is an express clause to the contrary, the forfeiture of the term presupposes a prior formal notice to which no response has been received, specifying the period within which the debtor must remedy the situation (Cass. 1re civ., 3 June 2015, no. 14-15.655, Bull.). A forfeiture pronounced without formal notice, or on the basis of imprecise formal notice, is irregular. Its nullity deprives the bank of the right to demand the capital immediately and limits it to only those instalments actually due - a decisive defence when the debtor is sued on the basis of a full statement of account.
«Unless expressly and unequivocally provided otherwise, a forfeiture of the term may not be pronounced without the delivery of a formal notice that has remained without effect, specifying the period of time available to the debtor to put an end to it». This landmark ruling condemns the practice of automatic forfeiture without prior notice. It forms the basis for the majority of forfeiture cancellations handed down by lower courts and is the first ground to be examined in any bank collection case. Visit guide to accelerated payment sets out the procedural consequences.
La disputing the APR remains a classic field, even if it has been narrowed by post-2019 case law. If a borrower can prove that there has been an error in calculating the rate - fees forgotten, insurance not included, the cost of collateral not accounted for - he or she can obtain a reduction in the applicable rate and repayment of the interest overpaid. The examination involves a technical calculation that few borrowers are able to carry out on their own; it often justifies the use of a chartered accountant instructed by the lawyer.
La liability of the bank providing credit is fuelling a growing body of litigation, mainly on the basis of the duty to warn. The Court of Cassation has clarified that the burden of proving that the borrower is well-informed lies with the bank (Cass. com., 9 March 2022, no. 20-16.277), which reverses the evidential dynamic in favour of the debtor. The compensation, calculated as a loss of opportunity to have avoided the contract, may represent a substantial fraction of the capital loaned and is generally set off against the bank's claim in the recovery proceedings.
Le bond litigation In practice, this remains one of the most profitable options for the debtor. Disproportionality of the commitment to the guarantor's financial capacity, failure to provide annual information, irregular handwritten wording, failure to comply with the duty to warn an uninformed guarantor: the grounds are cumulative, and there are many rulings granting full or partial discharge. Any disputed guarantee case must begin with an audit of the initial undertaking and its performance by the bank.
Finally, the prescription litigation deserves a mention. A lender's action for payment of sums due under credit granted to an individual is time-barred after two years from the event giving rise to it (article L. 218-2 of the French Consumer Code). This two-year statute of limitations - which is short and of public policy - is regularly omitted and provides a decisive defence when the lender has been late in instituting proceedings.
When credit becomes a burden
When a private individual can no longer meet all his or her non-business debts, French law provides for a specific procedure, distinct from the collective procedures applicable to businesses: the dealing with over-indebtedness, This procedure is governed by articles L. 711-1 et seq. of the French Consumer Code. This procedure, which is managed by the Banque de France's over-indebtedness commissions, is based on a simple principle: to freeze legal proceedings while an amicable or, failing that, legal solution is worked out.
Referrals are free of charge and are made by submitting a file to the commission with territorial jurisdiction. If the application is deemed admissible, legal proceedings are suspended, the debtor is registered on the FICP and the commission examines two options: the personal recovery procedure (with or without judicial liquidation), reserved for irremediably compromised situations, which leads to the total cancellation of debts; or a conventional plan negotiated with creditors, which reschedules and sometimes reduces debts. When negotiations fail, the commission can impose measures (rescheduling, interest freeze, partial write-off) under the supervision of the protection judge.
Le guide to over-indebtedness details the conditions for admissibility, how the procedure works and the strategic choices to be made between the various options. The point to remember here is that a credit file that is sliding towards non-payment should be analysed early on from the perspective of over-indebtedness - not because this is necessarily the solution, but because it is one of the cards to be played in negotiations with the creditor, who knows that the commission can, at any time, freeze proceedings and impose a write-off.
Links with neighbouring areas
Credit law is never practised alone. It constantly intersects with four other areas of law that the firm practises, and this intersection explains why a credit case rarely goes beyond the confines of the Consumer Code.
With the banking law Firstly, credit law deals with contracts, while banking law deals with institutions. The two areas overlap in terms of the banker's liability, information obligations and the regulation of the players involved. Any argument based on the duty to warn, abusive support or the abrupt termination of a bank loan simultaneously draws on both bodies of law.
With the securities and guarantees secondly, almost all credit is accompanied by some form of security - surety, mortgage, pledge, independent guarantee. A credit litigation case almost always deals in parallel with the question of the validity and enforcement of the securities that guarantee it. The defences are cumulative: nullity of the forfeiture of the term on the credit side, disproportion or lack of annual information on the surety side, irregularity of the registration on the mortgage side.
With the enforcement procedures Attachment: once the lender has obtained a writ of execution - a judgement, a final order to pay, a notarised deed with an enforcement clause - it has the full arsenal of seizures at its disposal to recover its debt. Seizure of bank accounts, seizure of wages, seizure of the property being financed: credit disputes almost always lead, in the long run, to enforcement proceedings. The defences available under credit law (nullity of acceleration, two-year limitation period, disputed statement of account, bank liability to offset) are used before the enforcement judge.
With the collective proceedings lastly: when a business borrower goes into receivership, reorganisation or compulsory liquidation, the fate of outstanding credit claims is governed by Book VI of the French Commercial Code. Claims must be declared within the deadline, verified and contested, and a distinction must be made between claims arising before and after the commencement of insolvency proceedings. A credit file for a company in difficulty must be managed simultaneously from the perspective of both credit law and insolvency proceedings.
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