Credit and lending law in France

Credit and lending law governs every transaction in which a lender makes funds available to a borrower on terms requiring repayment, usually with interest and by a set date. The concept sounds straightforward. It is not. French law has never consolidated it into a single code: it is split between two distinct bodies of rules – the Monetary and Financial Code (Code monetaire et financier), which regulates who may lend, and the Consumer Code (Code de la consommation), which regulates loan agreements and protects borrowers – alongside the Civil Code for general contract law and a rich body of case law from the Cour de cassation on lender liability.

This fragmentation is deliberate. It reflects a constant tension in French law: encouraging credit as an engine of economic activity while shielding borrowers – whether consumers or unsophisticated professionals – from excessive debt. This guide sets out that dual logic, identifies the actors authorised to lend, surveys the main categories of credit, details the obligations placed on professional lenders, and reviews the litigation grounds on which credit disputes are won or lost.

A subject straddling two codes

Credit law rests first on the Monetary and Financial Code. This is where the credit transaction is defined, where its habitual exercise is reserved to licensed institutions, and where the supervisory framework sits. Article L. 313-1 gives the broadest possible definition: a credit transaction is any act by which a person, acting for consideration, makes or promises to make funds available to another, or undertakes a commitment by signature (guarantee, surety, aval) in that person’s interest. This captures not only conventional loans but also leasing, factoring, discounting, and any form of lender commitment that amounts economically to financing.

The Monetary and Financial Code thus governs the actors: who may lend, under what licensing conditions, subject to what oversight. But it does not regulate contract content. That is the role of the Consumer Code, whose Books III and VII organise consumer credit law: consumer credit (Articles L. 312-1 et seq.), mortgage credit (Articles L. 313-1 et seq.), debt consolidation, over-indebtedness, and the national payment default register (FICP). This code is a genuinely protective instrument: it imposes standardised pre-contractual information, a cooling-off period, a solvency check, interest rate caps, and formidable civil sanctions – forfeiture of interest, nullity of clauses, damages – when the lender fails to comply.

The Civil Code provides the general law of lending. Articles 1892 et seq. define the loan for use (pret a usage) and the loan for consumption (pret de consommation); Article 1905 establishes the principle of interest-bearing loans; Article 1907 requires the interest rate to be set out in writing. Since Ordinance No. 2021-1192 of 15 September 2021, it also contains the unified law of suretyship (Articles 2288 et seq.), previously scattered across the Consumer Code and the Commercial Code. Above these domestic provisions, EU law imposes a harmonised framework: Directive 2008/48/EC on consumer credit, Directive 2014/17/EU on mortgage credit, and Directive (EU) 2023/2225 (CCD2), which must be transposed by 2026 and extends the scope of consumer credit to short-term overdrafts and buy-now-pay-later arrangements.

The actors in credit

Not everyone is entitled to lend in France. Article L. 511-5 of the Monetary and Financial Code reserves the habitual exercise of credit transactions to credit institutions and finance companies licensed by the French Prudential Supervisory and Resolution Authority (Autorite de controle prudentiel et de resolution, or ACPR). Universal banks fall within the first category, combining deposit-taking and lending. Finance companies, created in 2014 during the transposition of EU law, are authorised to lend but may not take public deposits – this includes leasing companies, consumer finance subsidiaries, and most manufacturer-backed finance arms.

Around these central actors are the intermediaries in banking operations and payment services (IOBSPs) – mortgage and debt consolidation brokers, subject to registration with ORIAS and specific disclosure and advice obligations. Payment institutions and electronic money institutions, which may now grant short-term ancillary credit. And, at the margins, crowdlending platforms, which benefit from an exemption to the banking monopoly but remain subject to a specific regulatory status.

The banking monopoly is not merely a legal construct: its breach carries criminal penalties under Article L. 571-3 of the Monetary and Financial Code (three years’ imprisonment and a EUR 375,000 fine). The civil consequences are less clear-cut – case law does not treat contract nullity as the default sanction for breach of the monopoly – but a breach may give rise to unfair competition claims and expose the lender to administrative sanctions. Lending between private individuals remains free provided it is not habitual: a one-off loan between relatives, formalised by an acknowledgement of debt, does not fall within the monopoly. The guide on peer-to-peer lending details the boundary, which is fragile in practice, between occasional lending and habitual activity.

Above this landscape, the ACPR oversees the financial soundness and commercial practices of institutions; the Banque de France maintains the national register of consumer payment defaults (FICP), processes over-indebtedness applications, and publishes the usury rate thresholds; the European Central Bank supervises significant institutions within the eurozone under the Single Supervisory Mechanism. This layered structure produces a credit law in which prudential regulation, consumer protection, and market conduct control coexist without always converging.

Categories of credit

Credit law does not treat all financing equally. The applicable regime depends on both the nature of the borrower – consumer or professional – and the purpose of the credit. Four broad categories deserve distinction.

Consumer credit covers loans between EUR 200 and EUR 75,000 granted to individuals for non-professional purposes, other than those financing real estate. It encompasses personal loans (whether tied to a purchase or not), revolving credit, hire-purchase, overdrafts tacitly tolerated beyond one month, and – since Directive CCD2 – buy-now-pay-later. Its regime, codified at Articles L. 312-1 et seq. of the Consumer Code, is one of the most demanding in French private law: mandatory pre-contractual information via a Standard European Consumer Credit Information form (SECCI), a prior solvency assessment, a fourteen-day withdrawal period, a right to early repayment, strict controls on solicitation, and prohibitions on non-compliant “interest-free credit” offers. The consumer credit guide explores the civil sanctions facing lenders who breach these rules.

Mortgage credit, governed by Articles L. 313-1 et seq. of the Consumer Code since the ordinance of 25 March 2016 transposing the Mortgage Credit Directive, follows a parallel but even more protective logic. Mandatory offer, standardised European information sheet (ESIS), a non-waivable ten-day reflection period, statutory suspensive conditions, a regulated right to early repayment, and borrower insurance progressively detached from the loan contract through the Lagarde, Hamon, Bourquin, and Lemoine reforms. The mortgage credit guide details the mechanics of the loan offer and the pitfalls at signature.

Business credit, whether in the form of an investment loan, a short-term credit line, a lease, a factoring arrangement, or a discount, largely falls outside the Consumer Code. It is governed by general contract law, banking customs, and the case law on lender liability for improvident credit. Protection is thinner but it exists: case law has extended the duty to warn to unsophisticated managers and borrowing entities, and Article L. 313-12 of the Monetary and Financial Code requires sixty days’ notice before terminating an open-ended banking facility granted to a business.

Alongside these three main categories, lending between private individuals remains governed solely by the Civil Code – Articles 1892 to 1914. No pre-contractual information, no withdrawal period, but strict rules of evidence: a loan exceeding EUR 1,500 must be proved in writing, and best practice calls for an acknowledgement of debt registered with the tax authorities. The acknowledgement of debt guide is the key tool for securing these transactions.

The professional lender’s obligations

A professional lender is not free. A combination of statute and case law imposes obligations whose breach triggers formidable civil sanctions. Four stand out.

The first is pre-contractual information. The Consumer Code requires the lender to provide the borrower, before signature, with a standardised European information form – the ESIS for mortgage credit, its equivalent for consumer credit – detailing the total cost, the rate, the repayment schedule, ancillary charges, and the consequences of default. This information is not merely a document to be initialled: it conditions the validity of the borrower’s consent. Failure to provide it, or providing inaccurate information, exposes the lender to partial or total forfeiture of interest – a severe sanction that turns a profitable loan into a simple advance of funds.

The second is the solvency assessment. The lender must, before granting credit, consult the FICP and verify that the borrower has the resources to meet repayments. The assessment, which must rest on objective and documented evidence, has become a systematic judicial checkpoint. A poorly assembled file – self-declared income not verified, underestimated outgoings, a debt-to-income ratio left unchecked – undermines the bank’s position before the court when the borrower subsequently challenges the regularity of the grant.

The third, and the most formidable, is the duty to warn (devoir de mise en garde). Developed by case law from the early 2000s, it requires the banker granting credit to an unsophisticated borrower – that is, a client whose profession or experience does not equip them to assess the risk of the transaction alone – to alert them to the risk of excessive indebtedness arising from the credit. The obligation extends to unsophisticated sureties. The Cour de cassation has held that the bank which fails to demonstrate it warned the borrower incurs liability where, at the date of the credit grant, the risk of excessive indebtedness was established (Cass. com., 15 November 2017, No. 16-16.790). The breach gives rise to damages assessed on the basis of a loss of chance of not having contracted.

The fourth is rate regulation. The Consumer Code requires the written statement of the annual percentage rate of charge (APRC, known in French as TAEG), which must encompass all costs imposed on the borrower beyond nominal interest. The rate is capped by the usury threshold, set quarterly by the Banque de France and whose breach is a criminal offence. An inaccurate APRC opened the door, under case law prior to the ordinance of 17 July 2019, to the substitution of the statutory rate for the contractual rate; since that ordinance, the sanction is more measured – it presupposes actual loss to the borrower – but the argument continues to be raised regularly before the courts.

Borrower protection

Beyond the obligations placed on the lender, credit law grants individual borrowers a series of protective rights that make this one of the most heavily regulated areas of French private law.

The withdrawal period is the best known. For consumer credit, the borrower has fourteen days from acceptance of the offer to withdraw without reason and without cost (Article L. 312-19 of the Consumer Code). For mortgage credit, the mechanism differs: the borrower does not withdraw after acceptance; instead, there is a non-waivable ten-day reflection period during which the offer cannot be accepted, producing the same result – safeguarding consent against impulsive commitment.

The right to early repayment is guaranteed by law for consumer loans. The lender may charge a capped indemnity, but may neither refuse early repayment nor penalise its exercise beyond the statutory cap. For mortgage credit, the indemnity may not exceed six months’ interest at the average loan rate, subject to a ceiling of 3% of the outstanding capital.

Borrower insurance, long effectively imposed by banks bundling their insurance with the loan offer, has been progressively detached from the credit contract through successive reforms. The Lagarde Act (2010) established the principle of insurance delegation; the Hamon Act (2014) allowed switching within the first year; the Bourquin Amendment (2017) extended this to each annual anniversary; and the Lemoine Act of 28 February 2022 completed the process by permitting switching at any time, without charge or penalty, for all borrower insurance contracts linked to a mortgage (Article L. 113-12-2 of the Insurance Code). This is today one of the most effective savings levers for households with a mortgage.

Finally, the annual information obligation to the surety, imposed by Articles 2302 et seq. of the Civil Code since the 2021 reform, requires the professional creditor to inform each natural person surety annually of the outstanding principal and interest of the guaranteed debt. Failure triggers forfeiture of interest and penalties accrued since the previous notice. The sanction is mechanical and systematic: any surety case involving an older credit must begin with an audit of compliance with this obligation, which is often sufficient to extinguish a substantial portion of the claimed debt.

Credit litigation

Credit litigation is not won on grand principles. It is won through a fine command of formal obligations. Five grounds structure the bulk of cases handled by a credit law practice.

Loan acceleration (decheance du terme) is the compulsory gateway to virtually every recovery action. Before claiming immediate repayment of the entire outstanding capital, the bank must declare the loan accelerated – a unilateral decision by which it considers the borrower’s default to entitle it to demand immediate repayment. The Cour de cassation has set demanding conditions for this mechanism: unless the contract contains an express and unequivocal clause to the contrary, acceleration requires a prior formal notice that has gone unheeded, specifying the time allowed for the borrower to remedy the default (Cass. 1re civ., 3 June 2015, No. 14-15.655, published). An acceleration declared without formal notice, or on the basis of an imprecise notice, is irregular. Its nullity deprives the bank of the right to claim the capital immediately and confines it to the instalments actually in arrears – a decisive defence where the borrower is pursued on the basis of a full outstanding balance.

Challenging the APRC remains a classic ground, albeit narrowed by post-2019 case law. A borrower who demonstrates an error in the rate calculation – omitted charges, insurance not included, security costs not accounted for – may, if they prove actual loss, obtain a reduction in the applicable rate and reimbursement of overpaid interest. The exercise requires a technical calculation few borrowers can conduct alone; it often justifies instructing a chartered accountant through the lawyer.

Lender liability for improvident credit fuels an increasingly dense body of litigation, primarily on the basis of the duty to warn. The Cour de cassation has held that the burden of proving the borrower was sophisticated lies with the bank (Cass. com., 9 March 2022, No. 20-16.277), reversing the evidential dynamic in the borrower’s favour. Compensation, assessed as a loss of chance of not having contracted, may represent a substantial fraction of the capital lent and is typically set off against the bank’s claim in the recovery proceedings.

Surety litigation remains, in practice, one of the most productive grounds for the borrower. Disproportionate commitment relative to the surety’s financial capacity, failure to provide annual information, irregular handwritten wording, breach of the duty to warn towards the unsophisticated surety: these grounds cumulate, and rulings discharging the surety in whole or in part are frequent. Every contested surety case must begin with an audit of the initial commitment and its performance by the bank.

Finally, limitation deserves mention. The lender’s action for sums due under a consumer credit is subject to a two-year limitation period from the event giving rise to the claim (Article L. 218-2 of the Consumer Code). This short limitation period – of public policy – is regularly overlooked and provides a decisive defence where the lender has delayed bringing proceedings.

When credit becomes a burden

Where an individual can no longer meet the totality of their non-professional debts, French law opens a specific pathway, distinct from the insolvency proceedings applicable to businesses: over-indebtedness treatment, governed by Articles L. 711-1 et seq. of the Consumer Code. This procedure, administered by the over-indebtedness commissions of the Banque de France, rests on a simple principle: freeze enforcement proceedings while working towards an amicable solution or, failing that, a court-imposed one.

The application is free and is filed with the territorially competent commission. Where the application is accepted, enforcement proceedings are stayed, the debtor is registered on the FICP, and the commission examines two routes: the personal recovery procedure (retablissement personnel), with or without judicial liquidation, reserved for irretrievably compromised situations, which results in total debt discharge; or a conventional repayment plan negotiated with creditors, which reschedules and sometimes reduces debts. Where negotiation fails, the commission may impose measures (rescheduling, interest freeze, partial discharge) under judicial supervision.

The over-indebtedness guide details the eligibility conditions, the procedure, and the strategic choices between the different routes. The key point here is that any credit case heading towards default must be analysed early through the lens of over-indebtedness – not because it is necessarily the solution, but because it is one of the cards to play in negotiation with the creditor, who knows the commission can, at any time, freeze proceedings and impose a discharge.

Interaction with neighbouring areas

Credit law is never practised in isolation. It constantly intersects with four other areas the firm handles, and this intersection explains why a credit case rarely stays within the bounds of the Consumer Code alone.

With banking law first: credit law deals with the contract, banking law with the institution. The two overlap on lender liability, information obligations, and the regulation of market actors. Any argument based on the duty to warn, abusive support, or abrupt termination of banking facilities draws on both bodies of law simultaneously.

With security interests and guarantees second: virtually every credit is accompanied by a security – surety, mortgage, pledge, charge, demand guarantee. A credit litigation case almost always addresses, in parallel, the validity and enforcement of the securities backing the loan. Defence grounds cumulate: nullity of the loan acceleration on the credit side, disproportionality or failure to provide annual information on the surety side, irregularity of registration on the mortgage side.

With enforcement proceedings: once the lender has obtained an enforcement title – a judgment, a payment order that has become final, a notarial deed bearing the enforcement formula – it has the full arsenal of seizure at its disposal. Attachment of bank accounts, wage garnishment, property seizure of the financed asset: credit litigation almost always leads, eventually, to a forced execution procedure. Defence grounds drawn from credit law (nullity of the acceleration, two-year limitation, challenge to the amount claimed, lender liability set off in compensation) find expression before the enforcement judge.

With insolvency proceedings last: where the professional borrower enters safeguard proceedings, judicial reorganisation, or liquidation, the fate of outstanding credit claims is governed by Book VI of the Commercial Code. Filing proof of debt within the prescribed time limits, verification, challenge, differential treatment of pre- and post-opening claims: a credit case for a business in difficulty is managed simultaneously from the credit law and insolvency perspectives.