You've probably noticed it in shopping centres: that tempting offer to "pay in instalments" or that shop card promising benefits. These schemes often conceal revolving credit, a financial instrument governed by strict regulations. Legislators have gradually tightened the safeguards around this product, which is sometimes nicknamed "revolving credit". Find out more about revolving credit the general legal framework for consumer credit and changes to it.
Legal definition and characteristics
Article L.312-57 of the French Consumer Code precisely defines revolving credit as :
"a credit facility which, whether or not accompanied by the use of a credit card, offers its beneficiary the possibility of using the amount of credit granted in instalments, on the dates of his choice".
This legal definition distinguishes revolving credit from other forms of consumer credit. Unlike a conventional personal loan, where the borrower receives a fixed sum repayable according to a fixed timetable, revolving credit provides a reserve of money that can be partially used at any time.
What makes it special? The capital is replenished as you make repayments, creating a permanent "cash reserve".
The Liévin District Court clarified this distinction in a ruling dated 6 March 2001:
"In the first place, permanent credit must provide the borrower with information on his rights and obligations, in accordance with the standard preliminary offers set out in the French Consumer Code [...] Its duration is limited to one year, and its renewal is subject to the borrower fulfilling positive obligations.
Rules specific to revolving credit
Enhanced information obligation
The creditor must provide the consumer with a detailed monthly statement of account. Article L.312-71 of the French Consumer Code requires the following information to be provided:
- The statement cut-off date and the payment date
- The fraction of available capital
- The amount of the instalment, including the interest portion
- Le overall effective rateThis is essential for tracking the real cost of this variable cash reserve.
- Estimated number of monthly payments outstanding
This information must appear on the first page of the document, in legible characters.
Minimum capital repayment
To avoid perpetual debt, each instalment must now include a minimum repayment of the capital borrowed. Article L.312-65 of the French Consumer Code stipulates that this amount varies according to the total amount of credit granted.
Article D.312-27 of the same code sets out how this minimum reimbursement is calculated.
Here's a concrete example: for a revolving credit of €3,000 that is used in full, the minimum repayment period must allow the capital to be repaid according to a progressive scale, so that only the interest is paid.
Limited duration and express renewal
Revolving credit is concluded for one year only. Renewal is not automatic, but subject to conditions.
Article L.312-75 requires the lender to :
- Consult the National Register of Consumer Credit Repayment Incidents (FICP)
- Check the borrower's creditworthiness every three years
If the contract is not used for one year, article L.312-80 stipulates that it will lapse. The lender must then send the borrower a document reminding him of this situation. If no response is received within twenty days, the contract is automatically terminated.
The revolving credit card
Credit card" must be mentioned
To avoid any confusion, article L.312-68 of the Code requires that the card linked to a revolving credit must expressly bear the words "credit card".
This requirement, introduced by the Lagarde Act of 2010, is designed to clearly distinguish these cards from traditional bank cards.
Distinction between cash and credit payments
Cardholders must always be able to choose between payment in cash and payment on credit. Article L.312-69 stipulates that the consumer must expressly agree to payment on credit after being informed by the retailer.
This measure puts an end to the controversial practice of paying by default on credit, which could lead to insidious indebtedness when making everyday purchases.
Article L.312-63 also prohibits linking commercial advantages (loyalty programme) to the use of a credit card. Retailers offering a benefits programme that includes credit must offer an alternative programme without credit.
Periodic solvency checks
Revolving credit requires constant monitoring of the borrower's financial situation. This vigilance is part of the rules governing the formation of consumer credit agreements, particularly as regards the assessment of creditworthiness.
Consulting the FICP
Before any annual renewal, article L.312-75 requires consultation of the FICP. Every three years, the lender must go one step further and carry out a full credit check, as if it were a new loan.
This system aims to prevent over-indebtedness by identifying problem situations before they become serious.
Possible consequences
If this check reveals financial fragility, article L.312-76 authorises the lender to :
- Do not propose renewal
- Suspending the right to use
- Reduce the total amount of credit
A recent example illustrates the importance of these measures: in a ruling handed down on 18 September 2003, the Rennes Court of Appeal held that the starting point of the foreclosure period in this type of credit is the day of the first unpaid incident, underlining the lender's responsibility to monitor creditworthiness.
Are you worried about your situation? Consult a specialist lawyer. The legal complexity of revolving credit generates a lot of litigation. Personalised advice can often identify irregularities in the offer, which could result in the lender losing the right to interest.
Sources
- Articles L.312-57 to L.312-83 of the Consumer Code
- Law no. 2010-737 of 1 July 2010 reforming consumer credit (known as the "Lagarde Law")
- TI Liévin, 6 March 2001, JurisData n°2001-010108
- CA Rennes, 18 September 2003, Contrats, conc. consom. 2004, comm. 67
- Article D.312-27 of the French Consumer Code (calculation of the minimum repayment)
- G. Raymond, "Droit de la consommation", LexisNexis, 4th edition, 2017
- CJEU, 27 March 2014, Case C-565/12, on penalties for failure to comply with the solvency assessment obligation.
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