Consumer credit: Bank bonds

Verified 01 July 2023 - Directorate for Legal and Administrative Information (Prime Minister)

When you apply for a consumer credit, the bank needs to look at your situation to see if you can afford to repay the maturities.

The bank also has an obligation to inform you, before the contract is signed, of the characteristics of the credit and the risks associated with a default.

The credit rate must not exceed the wear and tear rate, which is the maximum legal rate that credit institutions are allowed to charge when granting you a loan.

Before signing the credit agreement, the lender also checks your financial situation (we also talk about creditworthiness).

In particular, they may ask you to:

  • any proof of domicile,
  • and any proof of income,
  • and any proof of your identity.

It shall also consult the Bank of France files to check that you are not registered for several payment incidents (overdraft, unrepaid credit...).

Before signing the contract, the lender (the bank or the credit institution) must provide you with the information that will enable you to know whether the credit is suitable for your needs and financial situation.

The lender must obligatory provide you with a pre-contractual information sheet containing the following elements:

  • Identity and address of the lender
  • Type of credit (earmarked credit, staff, renewable...)
  • Amount of credit and conditions for making available the amount borrowed
  • Duration of the contract, number and schedule of refunds (per month, every 2 months...)
  • Total amount due
  • The total cost of the charge, expressed as a specific amount
  • Annual percentage rate of charge (APR) (except in case of rent-to-own), with explanations of how this rate is calculated (expressed as a percentage of the sum borrowed)
  • Compensation payable in the event of late payment
  • Existence of a withdrawal period : you have 14 calendar days to give up your credit after the contract is signed
  • Articles of the Consumer Code on the period of validity of the offer and on the minimum period for reflection
  • Your right to obtain, on request and free of charge, a copy of the credit agreement offer
  • In the case of an assigned appropriation, the property or service provided is financed

FYI  

when buying back credits, the lender must tell you whether your new credit (which consolidates your old credits) creates a higher or longer debt than your old credits. This information must be given in writing.

The bank is obliged to offer you a annual percentage rate of charge (APR) who does not exceed the rate of wear.

The annual effective rate global is the rate that takes into account all the costs incurred by the loan (bank interest, borrower insurance, application fees, broker's commission, etc.).

The wear rate is the maximum legal interest rate applicable in France.

It exists different rates of wear, depending on the amount borrowed and the duration of the loan.

You can find the wear and tear rate applicable to your loan in the following table:

Tableau - Rates of wear and tear on loans to individuals

Credits

Wear rate

Loans up to

€3,000

21.45%

Loans exceeding

€3,000

and less than or equal to

€6,000

11.47%

Loans exceeding

€6,000

6.64%

The lender may ask you to take out borrower insurance. This insurance will pay your monthly payments in case of payment incident on your part. If so, the lender should inform you of the standard cost of the insurance. He must give you an example of an insurer's price. An example should show a specific amount per month.

The lender may offer you a contract with a partner insurer, but you remain free to contact the insurer of your choice.

The lender must maintain the terms and conditions set out in its loan offer for a minimum period of 15 days calendar days.

You may accept and return this offer during this period.

After 15 days, if you still haven't signed, the lender can change its offer (increase the interest rate for example).

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