When a private individual or company director contacts a credit broker, he or she expects much more than simply to be put in touch with a bank. They are looking for expertise, support and, above all, sound advice to help them obtain the best possible financing terms. This expectation is governed by a fundamental legal obligation: the broker's duty to advise. Although the details of this obligation are often overlooked, it lies at the heart of the customer relationship and the responsibility of this intermediary. It is one of a series of responsibilities that govern the activities of banking intermediaries, as set out below. our complete guide to the obligations of IOBSPs. Understanding the scope and limits of this duty is essential for any borrower wishing to ensure that their interests are properly defended.
Definition and legal basis of COBSPs' duty to advise
The duty to provide advice is a central concept that distinguishes brokers from mere business introducers. Its source is to be found in precise regulations which, although they do not always use the exact term "advice", clearly define its contours for Brokers in Banking and Payment Services (COBSP) and their agents.
What is the duty to advise?
It is important not to confuse the duty to advise with two other closely related obligations: the duty to inform and the duty to warn. The duty to inform requires that customers be provided with objective, factual information about a product or service. The duty to warn, on the other hand, requires an uninformed customer to be alerted to the risks of excessive indebtedness associated with a transaction. The duty to advise goes further. It involves an active approach in which the professional, after analysing the customer's situation and needs, issues an opinion and makes a personalised recommendation. In practical terms, the advice guides the customer's decision towards the solution deemed most appropriate for him.
The duty to provide advice in banking
Historically, the courts have been reluctant to impose a general duty of advice on bankers providing credit. Apart from specific situations, such as portfolio management or involvement in complex tax exemption schemes, bankers are mainly bound by a duty to warn. The situation is different for credit brokers. Their role as intermediaries, commissioned by the customer, places them in the position of confidant and guide, justifying a more assertive and systematic duty to advise, which differs from simple general information requirements.
Specific regulations governing COBSPs
The broker's duty to advise is based primarily on the Monetary and Financial Code. Articles R. 519-28 and R. 519-29, although they do not use the word "advice", clearly set out the duties that characterise it. Article R. 519-28 requires the broker to "analyse a sufficient number of contracts" in order to "recommend or propose a contract suited to the customer's needs". Article R. 519-29 adds that the broker must explain to the customer "the reasons for" his proposals. The obligation to recommend or propose a "suitable" contract and to "give reasons" for this proposal constitutes the very essence of the duty to advise: it is not a question of presenting a catalogue, but of guiding a choice.
The content and scope of the broker's duty to advise
This duty to advise is not simply a declaration of intent. It takes the form of a structured process and precise requirements, compliance with which the broker must be able to prove in the event of a dispute. However, this duty also has boundaries that have been clearly defined by case law.
The stages of consultancy: information, analysis, communication, motivation
The broker's duty to advise can be broken down into four key phases. Firstly, they need to find out everything they can about their customer's financial situation, needs and objectives. Next, they must analyse a representative range of products on the market to identify the most appropriate solutions. This analysis must be objective, and not limited to partners offering the best commission. Next comes communication: the broker must present the customer with the contracts he considers most appropriate. Finally, and this is a decisive stage, they must give reasons for their recommendation, explaining in a clear and personalised way why one offer is more suitable than another in terms of the customer's situation.
Formalities and proof of compliance with the obligation
In the event of a dispute, the burden of proof that the duty to advise has been fulfilled falls on the broker. It is therefore vital for brokers to build up a solid file. The best practice is to formalise their recommendations in writing, giving them to the customer and explaining them before signing. This document should detail the needs expressed by the customer, the options studied and the precise reasons for the final proposal. Such a document, countersigned by the customer, will attest to the proper performance of the broker's due diligence and will constitute essential evidence before a judge.
The limits of the broker's duty to advise
The broker's duty to advise, while broad, is not unlimited. Case law has clarified that this obligation relates exclusively to the financing transaction (the credit and its accessories, such as borrower's insurance) and not to the financed transaction itself. For example, a broker is not required to give an opinion on the profitability of a property investment or the viability of a business project. Furthermore, the quality of the advice given depends directly on the accuracy and completeness of the information provided by the customer. A customer who omits information or provides incorrect data would find it difficult to blame the broker for inadequate advice.
Case law on brokers' duty to advise: clarification and controversy
The courts have gradually refined the contours of the broker's duty to advise, clarifying its practical content while leaving certain areas open to debate, particularly as regards the penalty applicable in the event of breach.
Interpretation by trial judges
Several court rulings have illustrated the practical scope of the duty to advise. For example, judges have ruled that advice should extend to loan accessories, such as credit insurance, by guiding the customer towards the most appropriate solution for his or her profile. In another case, a broker was found at fault for failing to inform his client of the imminent arrival of more advantageous conditions for a zero-rate loan (PTZ), even though this information was public. These cases show that the courts expect brokers to keep an active watch and take a proactive approach to defending their clients' interests. The broker's role is also central to attesting to the steps taken, which is particularly important in cases of difficulties in obtaining financing.
The number of offers produced: a matter of debate
One practical question has given rise to divergent interpretations: is the broker obliged to systematically present several loan offers to his customer? Some judges consider that the production of a single offer, even if it is suitable, is not sufficient to prove that the broker has effectively put the offer out to tender. Other, more nuanced rulings consider that if the broker can demonstrate that he has analysed a wide range of offers and that the only proposal obtained is the result of numerous other refusals, he has fulfilled his mission. The presentation of a single offer is therefore not automatically at fault, but the broker must be able to justify his research and analysis process.
Penalties for breaches: loss of opportunity
Where a breach of the duty to advise has been established and has caused harm to the customer, the sanction most commonly applied by the courts is compensation for "loss of opportunity". This does not mean repaying the loan or interest in full. The idea is to compensate for the loss suffered by the customer who, had they been properly advised, would have had the chance not to take out the loan or to take it out on better terms (a lower rate, cheaper insurance, a more suitable loan structure). The assessment of this loss of opportunity is left to the discretion of the judge, who will determine it on the basis of the specific circumstances of each case.
The duty to provide advice is an onerous obligation that fully engages the broker's responsibility. For the borrower, its proper execution is the guarantee of optimised and secure financing. If you have any doubts about the quality of the advice you have received, or if you feel that you have suffered prejudice as a result of a breach of this duty, you should seek the advice of an independent expert. expert lawyer in banking law is crucial to assessing your rights and considering possible courses of action. Our firm can help you analyse your situation and defend your interests.
Sources
- Monetary and Financial Code (in particular articles R. 519-28 and R. 519-29)
- Consumer Code
EN 
FR