From 1 May 2011, the reform of Christine Lagarde on consumer credit begins its 5th and final part. After framing advertising and buying back credit, shortening the durations of over-indebtedness plans or registering in payment incident files (FICP), the text is finalizing consumer protection against revolving credits.
To fight against the evils of revolving credit, two new decrees enthroned the end of interminable loans and the modernization of the usury regime.
Conditioning of the duration of revolving credits
The text provides for the fixing of a minimum maturity with a duration of 36 months up to $ 3,000 and 60 months for larger sums. Although necessary, this measure represents however minimal progress insofar as fixing a minimum maturity is a procedure already used by credit organizations. This maturity corresponds to a declining rate of 3% applied to the capital due by the borrower. Since the smallest reserve of money is $ 500, the minimum monthly payment has been $ 15 for years. The decree providing for this limitation therefore establishes an already widespread practice.
Checking the revolving credit usury rates.
On the other hand, controlling interest rates represents an important asset in the fight against over-indebtedness. In fact, very often, the interest rates on revolving loans are high and disproportionate. A practice that often allows lending establishments to ensure promotional rates to retain or acquire new customers. Henceforth, the law establishes the fixing of a rate of wear according to the amount and the use of the borrower. This second part also represents a significant advance by instituting the possibility of carrying out a maximum of two deferrals per year, leading in parallel to the blocking of the available. Sometimes used to troubleshoot certain files, this measure was neither automatic nor legislated.
With these last two measures, the consumer credit reform is finally implemented. It should help limit household over-indebtedness and protect consumers of credit. Its first effects will be appreciable from September with the next review of over-indebtedness communicated by the Good Lenders Bank.
Wear rate at 1 April 2011
Based on the average effective rates applied by credit institutions during the 4th quarter of 2010, the usury thresholds applicable from April 1, 2011 have just been published:
- 5.61% for a fixed rate home loan (average effective rate: 4.21%),
- 5.01% for a variable rate mortgage (average effective rate: 3.76%)
- 5.99% for a bridging loan (average effective rate: 4.49%).
For consumer loans, the law of July 1, 2010 reforming consumer credit reformed the procedures for setting the usury threshold for this type of loan.
The categories which serves as a basis for calculating the usury thresholds will now be fixed according to the amount of the loans. The law also provides for a transitional period of eight quarters for the progressive application of this reform.
During this period, the wear thresholds will be calculated in seven categories:
- 21.47% for a consumer loan less than or equal to $ 1,524.
- 19.53% for a revolving or an overdraft of an amount greater than $ 1,524 and less than $ 3,000.
- 8.03% for a personal loan greater than $ 1,524 and less than $ 3,000.
- 19.53% for a revolving or overdraft amounting between $ 3,000 and $ 6,000.
- 8.03% for a personal loan between $ 3,000 and $ 6,000.
- 19.53% for a revolving or an overdraft of an amount greater than $ 6,000.
- 8.03% for a personal loan of an amount greater than $ 6,000.