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You've probably already taken out a loan to finance the purchase of a car, a television set or to pay for renovation work. These transactions, which are part of our daily lives, are governed by a complex and protective legal arsenal. Since the 1970s, legislators have gradually introduced a system to protect borrowers, who are considered to be the weaker party to the contract.
Legal definition of consumer credit
A specific credit transaction
Article L. 313-1 of the French Monetary and Financial Code defines a credit transaction as :
"Any act by which a person acting for valuable consideration places or promises to place funds at the disposal of another person or makes, in the latter's interest, a commitment by signature such as an endorsement, a bond or a guarantee.
Consumer credit has its own specific characteristics. According to Article L. 311-1, 6° of the French Consumer Code, it involves :
"A transaction or contract in which a lender grants or agrees to grant a borrower credit in the form of a deferred payment, a loan, including an overdraft or any other similar payment facility.
To qualify as consumer credit, the amount must be between €200 and €75,000. Mortgages and loans secured by mortgage are excluded from this category.
Specific exclusions
- Overdrafts repayable within one month
- Free credit repayable in less than three months
- Contracts for ongoing services with staggered payments
Historical development of the legal framework
From early protection to European rules
Consumer credit exploded after the Second World War. The Scrivener Act of 10 January 1978 introduced consumer protection, imposing strict formalities on credit institutions.
European Directive 87/102/EEC of 22 December 1986 harmonised national legislation. But it was Directive 2008/48/EC of 23 April 2008 that revolutionised the legal landscape by imposing total harmonisation between Member States.
The Lagarde Act: a French revolution
Act no. 2010-737 of 1 July 2010, known as the "Lagarde Act", transposed this directive into French law. It introduced several major innovations:
- Creation of a standardised pre-contractual information sheet
- Obligation to check the borrower's creditworthiness
- Strict controls on revolving credit
- Extension of the withdrawal period from 7 to 14 days
The aim of this law was to promote "responsible credit". A striking example of the changes made: credit cards associated with revolving credit must now be labelled "credit card" rather than simply "loyalty card".
Consumer credit players
Borrowers and lenders: rights and obligations
The borrower, defined in article L. 311-1, 2° of the French Consumer Code, is "any natural person who has a relationship with a lender in connection with a credit transaction carried out or planned for a purpose unrelated to his or her commercial or professional activity".. To find out if you fall under this protective regime for consumer creditIt is essential to understand these precise criteria.
The lender is "any person who grants or undertakes to grant credit in the course of his commercial or professional activities"..
The lender's obligations include :
- Pre-contractual information
- Solvency checks
- Drawing up a compliant contract
- Compliance with the withdrawal period
A ruling by the Vienna District Court on 14 March 2003 reiterated the importance of these obligations, emphasising the need for informed consent from the borrower.
The role of intermediaries
Article L. 311-1, 5° defines a credit intermediary as :
"Any person who, in the course of his normal commercial or professional activities, and in return for remuneration or an economic benefit, assists in carrying out a transaction referred to in this chapter, without acting in the capacity of a lender..
Vendors, canvassers and brokers can be described as intermediaries. As the Court of Cassation pointed out in its ruling of 14 November 2001, they may be held liable if they fail to comply with their legal obligations.
The new Consumer Code and its impact
The recodification of the Consumer Code by Order no. 2016-301 of 14 March 2016 changed the numbering of articles without substantially changing the substance of the law.
One major innovation concerns the judge's role. Article R. 632-1 of the Consumer Code now allows judges to raise any provision of the Code ex officio in disputes falling within its scope. This possibility, confirmed by the CJEU on 5 March 2020, strengthens consumer protection.
Control of the proportionality of sureties has also been strengthened. In its ruling of 22 May 2019, the Court of Cassation specified that proportionality is assessed in the light of the guarantor's income and assets.
Consumer credit is an area where the litigation remains plentiful, with its own limitation periods and specific penalties. Analysis of a contract requires expertise to identify potential irregularities. Sanctions such as forfeiture of interest may be imposed on the credit institution at fault. It is crucial to understand the rules governing the formation of contracts and possible remedies in the event of non-compliance.
Do you have a problem with your consumer credit? Does your contract contain dubious clauses? Find out how to navigate these complex regulations, a lawyer specialising in consumer credit can help you. Please do not hesitate to contact me for a personalised analysis of your situation.
Sources
- Consumer Code, articles L. 311-1, L. 312-1 to L. 312-94, R. 312-1 to R. 312-35
- Monetary and Financial Code, article L. 313-1
- Law no. 78-22 of 10 January 1978 on consumer information and protection in respect of certain credit transactions
- Law no. 2010-737 of 1 July 2010 reforming consumer credit
- Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008
- CJEU, 5 March 2020, Case C-679/18, OPR Finance s.r.o v/ CK
- Cass. 1st civ. 22 May 2019, no. 18-11.658
- Cass. 1st civ. 14 November 2001, JurisData no. 2001-011830
- Tribunal d'instance de Vienne, 14 March 2003, JurisData no. 2003-212562
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