Credit-cards

Credit

loan is a provision of money in the form of a loan , granted by a creditor (lender) to a debtor (borrower). For the creditor , the transaction gives rise to a claim on the borrower, under which he can obtain repayment of funds and payment of remuneration (interest) according to a schedule. For the borrower, be it a company or an individual, the credit recognizes the existence of a debt and opens the provision of a temporary financial resource.

Etymology

The credit cards are coupled to a revolving credit, considered a consumer credit.

The etymological term “credit” (past participle of Latin: ” credere “, believe) recalls that the transaction is based on the belief by the creditor, that the debtor will be able to pay his debt at maturity. The creditor is therefore “the one who trusts ” a debtor.

In Law

Credit law has grown considerably, as a result of the diversification of banking professions and the distribution of credit (distance, internet, intermediary or iobsp ), and under the protection of consumers.

Definition of the credit agreement

The credit is a contract by which the creditor (of an obligation to pay a price, resulting from any contract ) agrees to the postponement of the performance of his performance (payment of his debt ) by the debtor . Legally, the obligation to pay is affected by a term 1 .

If, technically, the credit should not be confused with the loan , legally, the two are equivalent. The loan is certainly based on the credit mechanism (since the repayment obligation has a term), but all credit is not a loan (since the credit in the strict sense, that is the mechanism credit, which is not comparable to a financing contract, does not imply the remittance of a sum of money by the creditor).

This point has no application in law; the two terms are very often used for each other, as regards sums of money, without affecting the proper understanding of operations. Neither the Consumer Code nor the Monetary and Financial Code introduces a difference between loan and credit.

Credit presupposes confidence of creditors in the ability of the debtor to honor its debt as planned terms. This is why there is no “right to credit”; lenders are always free to refuse credit, which is often recounted in case law .

Proof of the credit agreement

This proof lies with the professional, who must bring it by the contractual documents produced when the funds are made available.

It should be noted that proof of the existence of a capital search warrant entrusted to an intermediary in banking and payment services ( iobsp ) does not exempt the credit institution from producing proof of the contract of payment.ready himself; indeed, asking a broker to look for a loan does not mean that the consumer has accepted a loan.

Credit and life in a relationship

The spouse can be held jointly and severally to the credit debt taken by the other spouse, provided that the debt is “modest” and useful “to the needs of the household” or “to the needs of everyday life” (Article 220 paragraph 2 of the Civil Code ).

So many notions specified by jurisprudence . For example, a credit consolidation of 61,000 euros is not considered as falling within these criteria.

In the case of the withdrawal of the monthly installments of the credit on an account opened in the name of only one of the members of the couple, it is up to the other to show that the funds paid into this account were common (if this is the case case) 2 .

Credit Distribution Law

See detailed article: Bank Distribution Law

The recent banking developments distinguishes the credit granting function reserved for credit institutions and, since st October 2014 to crowdfunding in Intermediate , function of marketing credit, achieved either by employees of institutions credit , either by independent distributors of banks, intermediaries in banking operations and in payment services (or iobsp ).

Their regulatory framework, since January 15, 2013, has concretized this new dissociation, with a central objective of protecting borrowers.

This protection is legally reflected in the emergence of a credit counseling obligation, which brokers – Intermediary in banking and payment services are held with regard to borrowers.

Since 2016, loans to individuals have a legal regime established on common bases, whether consumer loans or mortgages. In France, this system modifies the Consumer Code (2016-351 by order of 25 March 2016), in installments between st July 2016 and 21 March 2019.

In the long run, the recent addition of this credit counseling requirement to iobsp brokers could jeopardize the lenders’ obligation, limited to the warning: it could disappear to be replaced by a would thus harmonize the protection of borrowers, regardless of the subscription channel chosen for credit.

Consumer / Borrower Information

The pre-contractual information of the borrower, and then during the life of the contract, is a fundamental aspect of consumer protection.

Legislation on the interest in France

In France, the concept of interest is accompanied by a reference rate, in this case the limit , which is the rate of ” attrition “.

Under Article L.313-3  [ archive ] of the Consumer Code  [ archive ] , is declared usurious “any conventional loan to an annual percentage rate (APR) that exceeds, by the time it is granted, to more than one third, the average effective rate applied in the previous quarter by credit institutions for similar transactions involving similar risks “. The thresholds of the usury  [ archive ] are published and can be consulted on the website of the Banque de France  [archive ]

Interest as the price of credit

Interest is the amount of money that the borrower must repay in addition to the amount borrowed (called the “Capital”). If asking for interest has been historically controversial, regulated (limitation of the phenomenon of attrition ), even condemned, banking lobbies today justify the requirement of interest by a series of arguments:

  1. The loan is a service provided by the lender to the borrower. Like any service, it is sold. The price of this service is precisely the interest. And this price is roughly proportional to the amount lent, which is why this price is usually presented in the form of a rate, called the interest rate.
  2. The remuneration of the banking activity: the invested capital deserves remuneration, it is necessary that there is a profit to practice the loan of money.
  3. This is the price to be paid to the creditor or the financier to compensate him for his waiver of his preference for liquidity .
  4. The risk of the lender: if some people do not repay and are not solvent, that is to say that the sale of their property does not recover the sum lent, the interest is supposed to cover the losses (at least in part).
  5. Inflation: Inflation leads to a constant depreciation of the purchasing power of the currency in which the debt is denominated. The interest theoretically allows to offset all or part of this devaluation and ultimately recover an equivalent amount of money.
  6. The tax exemption of interest in the context of a rental investment . This amounts to having the State assume part of the total cost of credit 3 .

The rate of wear

Fixes the ceiling that the commercial rates practiced can not exceed, under pain of sanction.

The percentage rate

The Total Effective Rate (APR) is the rate that is meant to represent the full cost to the customer customer (or a borrower ).

It was used for home loans to individuals, until 2016.

The TEG remains used for business loans, and possibly for loans to individuals excluding consumer loans and real estate loans after 2016.

It includes the contractually binding associated costs, namely file fees, miscellaneous commissions, cost of special guarantees. None of these costs should be forgotten in the calculation of the TEG. It is also necessary to distinguish additional costs related to services (maintenance for example for a car loan) to the ancillary costs of insurance. The current practice is to develop financing products and solutions that are similar to rentals and do not fall under the obligation to produce the TEG contractually. For some, there is still a way to go to ensure that professionals produce a sufficient level of information and clarity.

In 1998, the European Commission adopted by Directive No. 7 the following definition of the calculation of the TEG, in accordance with actuarial mathematics: the TEG is such that the algebraic sum of the discounted inflows (+) and outflows (-) is zero on any date. The TEG is the annual rate, base 365 per convention, equivalent to the daily discount rate i :{\ displaystyle (1 + TEG) = (1 + i) ^ {365}}. The updated feed{\ displaystyle F_ {A}} a stream {\ displaystyle F_ {0}} is such that {\ displaystyle F_ {A} = F_ {0} * (1 + i) ^ {N}}where N is the number of actual days separating the date of exchange {\ displaystyle F_ {A}} the date of the exchange {\ displaystyle F_ {0}}. The date of reference is usually the highest date of the flows.

France has adopted this directive in Law 2002-927.

The effective percentage rate is thus necessarily a proportional actuarial rate.

The Court of Cassation has also recalled, in a judgment of 27 November 2013.

It is easy to calculate the TEG of a credit with the help of a spreadsheet or tools that exist online.

The annualized annualized rate or APR

The APR is a legal indicator, therefore of the same nature as the TEG, but intended for consumer credit and, since 2016, only for real estate loans.

The legal interest rate in France

Constitutes the minimum interest rate applicable to certain legal situations or judicial decisions.

It applies to credits, but also, more broadly, to all situations in which capital can produce interest.

Main topics of credit dispute

In spite of the constant reinforcement of the legislation of the credit, in particular, under the impulse of the European Union , the litigation of the credit knows a strong development.

This one focuses on:

  • compliance with the information obligations of the lender and the intermediary: disclosure obligation (of the bank distributor ), obligation to inform , obligation to warn (or obligation to explain and obligation to advise , when due ;
  • the validity of the calculation of the Total Effective Rate or the Annualized Overall Percentage Rate ;
  • the validity of the guarantees provided, including sureties ;
  • the solidarity between co-borrowers, especially, within couples , according to different forms of union;
  • over- indebtedness also enters into the litigation of credit operations.

In finance

Credit includes all forms of making money available, whether in the form of bank loan agreements or payment terms from a supplier to a customer.

  • The credit usually carries an interest to be paid by the debtor (the beneficiary of the credit, also called borrower) to the creditor (the person who grants the credit, also called the lender).
  • When the provision of funds is made by a banking or financial institution, the latter may either use the prior savings available to it or be borrowed in turn from the money market, or create the amount borrowed by the financial mechanism. monetary creation 4 .

Credit Mechanism

Categories

Main article: Types of bank credits .

The banks , which are the main providers of credit, both individuals and companies generally distinguish between loans short term (less than one year), in the medium term (2 to 6 years) and long term ( beyond 6 years). This division is not standardized and varies from one bank to another.

In addition, one generally distinguishes:

  • the loan, a fixed sum determined once and for all, to be repaid in one or more specific deadlines ;
  • the permanent credit or the cash credit corresponding to the right to borrow money at will from the bank within limits of duration and amount. For the beneficiary, the interest is to use the money according to his need and therefore to borrow only the bare necessities. In this case, the bank grants a credit authorization called which can be used in the context:
    • a credit opening ;
    • a revolving credit , formerly called a permanent credit or revolving credit ;
    • an overdraft authorization .
  • the purchase of credit , which consists of consolidating all its consumer and real estate loans into a single loan;
  • the mortgage , intended for the purchase or renovation of real estate;
  • credit to professionals, for the purpose of financing assets used in a professional setting.

Producers (or suppliers) of credits

The credit institutions , category which includes the banks are obliged to obtain approval from the ACPR, their Administrative Authority for approval and control.

Similarly, crowdfunding in Intermediate , new legal category, effective from st October 2014 may, under certain conditions, carry out credit operations 5 .

The ACPR replaced Cecei and ACAM. This authority supervises credit institutions , as well as the European Central Bank and the European Banking Authority .

Debtor’s solvency analysis is central to the granting and sale of credit. PLCs are beginning to emerge, using algorithms and computer logic for this analysis 6 .

Generalist banks

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Specialized Institutions

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The intermediary crowdfunding

Since st October 2014, they can, under certain conditions, grant credits, as part of their activities crowdfunding or crowdfunding 7 .

The distribution of credit

The distribution or sale of credit can be seen as a structural change in bank credit. The need for a better banking equilibrium is reflected in greater consumer protection objectives.

The sale of credit is entrusted either to credit institutions or independent intermediaries of banking networks.

Thus, since 2013 , the marketing of credit by the Intermediaries in banking and payment services 8 has been subject to specific regulations 9 .

Similarly, the law reinforces the obligations and the responsibility of the banker providing credit . The duty to warn has been gradually released since 2006.

Given the recent creation of this duty to warn, both doctrine and case law have been slow to define the method of calculating harm and its restorative indemnity.

Several solutions are emerging from this point of view.

The theory, now applied, of the loss of luck, leads to exclude an indemnity equal to the amount of the loan, to fix it to a percentage of it, of the order of 5% to 10%. Such a method does not exclude, on a case-by-case basis, a larger indemnity, conditioned, for example, on the precise demonstration of the injury caused by the breach of the obligation to warn.

Finally, the legal framework for mortgage lending is expected to change significantly in March 2016 with the adoption on 10 September 2013 of the new European Real Estate Credit Directive (CARRP).

Notes and references

  1. ↑ Contract of consumer credit on the site vosdroits.service-public.fr  [ archive ]
  2. ↑ Supreme Court repayment of a joint loan with an individual account http://www.news-isfi.fr/0-Concubin___celui_qui_rembourse_s.html  [ archive ]
  3. ↑ ” Defiscalize interest on rental loans – Real Estate Heritage Finance ”  [ archive ] (accessed April 5, 2015 )
  4. ↑ Credit Information  [ archive ]
  5. ↑ Les Echos derogation to the banking monopoly https://www.lesechos.fr/idees-debats/cercle/cercle-101692-intermediaire-in-participation-funding-of-the-derage-to-the-bank-monopoly-risks -potential-1017215.php  [ archive ]
  6. ↑ Vending machines … credit http://www.news-isfi.fr/15-Le_distributeur_automatique____d.html  [ archive ]
  7. ↑ New status of IFP http://www.news-isfi.fr/3-Creation_de_deux_nouveaux_statut.html  [ archive ]
  8. ↑ Data sheet IOBSP: http://www.carriers-juridiques.com/actualites-et-conseils-emploi-juridique/courtier-en-credits/157  [ archive ]
  9. ↑ Laurent Denis, http://www.agefi.fr/articles/une-approche-didactique-de-la-distribution-bancaire-1274606.html  [ archive ]

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