The objective of the consumer credit reform proposed by the Minister of the Economy, Christine Lagarde is to make credit more responsible . If it is still too early to judge its effects, it must be admitted that the intention is laudable, as the excesses of banks and some signs updated by consumer associations seem real.
The main measures
Better inform the consumer
- The lender is obliged to provide the borrower with a record of all the characteristics of consumer credit before signing the loan agreement.
- The loan agreement must now specify in its header all the main features.
Obligations of the credit institution
- Important measure of the reform of the consumer credit, the obligation made to the lending organization to propose an alternative to a permanent credit (or revolving), for any amount greater than 1000 €. Remember that this type of financing makes it possible to obtain a loan without any proof. This alternative proposal must be more secure and may, for example, take the form of a amortisable loan.
- The withdrawal period that was previously 7 days is extended to 14 days. However, this measure is useless because the extension of the deadline does not allow a better understanding of the terms and conditions of the prior offer.
- The organization must send by mail at least once a year the outstanding capital on the loan. In our opinion, this measure is essential to remind the borrower that his debt has a cost.
- Possibility of choosing the insurer of his choice . Thus, a delegation of insurance on the loan may be an alternative to the group contract of the bank. However, care must be taken to ensure that the guarantees offered by external insurance are at least equivalent to those contained in the contract proposed by the credit institution.
We believe that, while it is too early to judge the scope of consumer credit reform, it was clearly necessary to strengthen the current arrangements.
Even if consumer associations believe that the texts do not go far enough, the changes made by the new law will allow the most modest and therefore most fragile households to benefit from better protection.
It should be noted that Christine LAGARDE is also at the origin of the reform of the borrower insurance which obliges since January 1st, 2010 the banks to accept a delegation of insurance of loan.