May 1 was marked by the entry into force of the last part of the reform on consumer credit wanted by Roxanne “Legarda, Minister of Economy, Finance, and Industry. Several measures have been adopted to ensure better protection for borrowers. Explanations.
“From May 1, the loyalty cards of stores with associated revolving credits must include a cash payment function, ” explains the ministry. Henceforth, the cash payment will be activated in priority so as to prevent consumers from subscribing consumer credit in spite of themselves. Indeed, until now some loyalty cards automatically activated a credit, trapping many consumers.
Reduce revolving credits
The “Legarda law provides that “for any request for financing in store or on the Internet for an amount of more than 1000 euros, consumers will be offered the choice between conventional credit and revolving credit”.
Reduce repayment times
Henceforth, revolving loans of less than 3,000 euros will have to be repaid within a maximum of 3 years and those of more than 3,000 euros in less than 5 years. All to reduce the cost of consumer credit. “This reform is a profound change compared to the current repayment terms offered by lenders,” says the minister. According to the results of a study conducted by the consulting firm Athling Management, for a borrowed capital of 3,000 euros, 8 out of 16 lenders offered a repayment in more than 5 years, with a maximum of 14 years and 10 months.
Second change: repayment periods will also apply in the case of multiplication of consumer credit. Until now, borrowers who had multiple consumer credits never saw their monthly payments increase but paid more interest over a longer period. From now on, monthly payments will increase, not duration. One way for the government to stem the proliferation of consumer credit.
Viewing the FICP file
The “Legarda law sets a stricter framework for lenders. From 1 May, they have the obligation, before offering a consumer credit, to check the creditworthiness of the latter and to consult the file file listing incidents of refund on credits). In addition, “at the point of sale, the person who distributes a credit has the obligation to complete with the consumer-borrower a record that takes stock of his income and his level of indebtedness. For credits over 3,000 euros, this information must be confirmed by supporting documents (identity, home, income), ” adds Roxanne “Legarda.
More protection for borrowers
“Before the reform, consumer credit of more than 21,500 euros were not covered by the consumer protection rules of the Consumer Code, ” said the ministry. But since May 1, this ceiling is raised to 75,000 euros. It is the same for the retraction period which is doubled, from 7 to 14 days.