Borrower Protection: Regulation and Recourse

In the field of credit, borrower protection is a major concern for legislators and regulatory authorities. Faced with risks of over-indebtedness, abusive commercial practices, or unfavorable contractual clauses, several laws and regulations have been put in place to protect the rights of borrowers. This article examines the main rules of borrower protection, as well as the recourse available in case of dispute or difficulty.

Main Regulations Protecting Borrowers

Several laws regulate the protection of borrowers in France. Here are the main regulations:

• The Consumer Code: This code is the main legal framework for consumer protection, including in the field of credit. It regulates commercial practices, credit contracts, and borrower rights. Articles L311-1 to L312-93 of the Consumer Code notably regulate consumer credits and mortgage loans.
• The Scrivener Law: This law, adopted in 1978, aims to protect consumers against abuses in the field of credit. It imposes information and transparency obligations on lenders, particularly regarding interest rates, total cost of credit, and repayment conditions.
• The Lagarde Law: In effect since 2010, this law strengthens borrower rights, especially regarding borrower insurance. It allows borrowers to freely choose their loan insurance, provided that it offers guarantees equivalent to those offered by the lender.
• The Hamon Law: Adopted in 2014, this law allows borrowers to cancel their loan insurance within 12 months after signing the contract. It aims to encourage competition and offer borrowers more advantageous insurance conditions.
• Right of Withdrawal: Borrowers have a 14-day right of withdrawal from the signing of the credit contract. This right allows for withdrawal without reason and without penalties, providing additional protection in case of regret or change in circumstances.

Borrowers' Rights

As a borrower, you have several rights designed to protect you in the context of a credit contract:

• Right to Information: Lenders are obligated to provide you with all necessary information to understand the credit conditions, including interest rates, total cost of credit, and repayment terms.
• Right to Transparency: Credit contracts must be written in a clear and understandable manner, without abusive or ambiguous clauses. You have the right to request explanations about the terms of the contract before signing.
• Right to Withdrawal: As mentioned earlier, you have a 14-day withdrawal period to cancel the credit contract without reason and without penalties.
• Right to Cancel Loan Insurance: You can cancel your loan insurance within 12 months after signing the contract, or at each contract anniversary, under the Hamon Law and the Bourquin amendment.
• Right to Early Repayment: You can repay all or part of your credit early, subject to the conditions provided in the contract. Early repayment fees are limited by law.

Recourse in Case of Dispute or Difficulty

In case of a dispute with your lender or difficulty in repaying your credit, several options are available to you:

• Bank Mediator: Each bank has an independent mediator responsible for amicably resolving disputes between the bank and its customers. You can contact the mediator for free in case of disagreement with your bank.
• Proximity Judge: For disputes of low value, you can contact the proximity judge, who has the authority to settle conflicts between consumers and professionals. The proximity judge can cancel certain clauses in the credit contract deemed abusive.
• Over-indebtedness Commission: If you are in a situation of over-indebtedness, you can contact the over-indebtedness commission of the Banque de France. This commission offers solutions to reschedule your debts, suspend legal action, or cancel part of your debts.
• Judicial Court: For complex or high-value disputes, you can contact the judicial court. The court has jurisdiction to rule on credit disputes, especially in cases of abusive clauses or deceptive commercial practices.

Real-Life Examples

Let's say a borrower discovers that their credit contract contains an abusive clause that was not clearly explained by the bank. They can first contact the bank mediator to try to resolve the dispute amicably. If the disagreement persists, they can bring the matter to the proximity judge, who can cancel the clause in question.

Laws Protecting Borrowers

The main laws regulating borrower protection are the Consumer Code, the Monetary and Financial Code, as well as various specific laws such as the Scrivener Law, the Lagarde Law, and the Hamon Law. These laws specify borrower rights, lender obligations, and possible recourse in case of dispute.

Conclusion

Borrower protection is a major issue in credit contracts. Thanks to strict regulations and clearly defined rights, borrowers can enter into credit agreements with confidence. In case of dispute or difficulty, several options are available to assert your rights. Before signing a credit contract, it is essential to understand your rights and obligations, and to consult an advisor if necessary to avoid unpleasant surprises.