Payday loan are more accessible than traditional bank loans. Its subscription is still subject to regulations put in place, in particular, in order to protect the individual borrower.
The objectives of payday loan regulation
The advent of mass consumption has created a need for rapid and staggered financing among French households. It is in this context that the payday loan finds all its relevance. Regulations were quickly put in place to regulate it: the objective is to protect the individual who signs up with a loan . This is to ensure that the borrower does not place himself in a situation of over-indebtedness by committing to repay too large a sum in relation to his resources.
Sources of regulation
The payday loan is an unrestricted consumer credit intended exclusively for individuals. It is therefore subject to the protective regulations of consumer law.
As early as 1978, the Good lender required lenders to clearly indicate certain information on their prior credit offers, such as the amount of credit, the rate (APR) and the various characteristics of the offer.
The legislation did not stop evolving, in a more protective sense towards the borrower, until the last reform carried out by the law of March 17, 2014 on consumption which extends the withdrawal period to 14 clear days .
The main features of the regulations
The main objective of the payday loan regulation is to avoid that an individual borrows too large sums in relation to his income and finds himself in a situation of financial distress: over-indebtedness.
- The maximum amount that can be borrowed when taking out a payday loan cannot exceed the sum of $ 75,000.
- The number of monthly payments does not exceed 96 months.
- The lending organization must provide the individual with a pre-contractual information sheet to enable them to assess whether the loan is in line with their financing needs and their repayment capacity.
- The loan conditions must be maintained for 15 days after the offer.
- The borrower has, at the signing of the contract, a withdrawal period of 14 clear days to reverse his decision. The waiver during this period is not subject to any justification or penalty.
In all cases, it is advisable to carry out a free simulation in order to make sure that your financial situation is consistent with the monthly payments to come.
It is not strictly speaking a law regulating the payday loan, but this element remains nevertheless essential when you take out a consumer credit.
The APR (annual effective annual rate) is an annualized interest rate including all the costs linked to the signing of the loan. The APR calculation therefore gives a broader and more complete picture of the true cost of a consumer loan. And therefore makes it easier to compare loan offers.
The APR includes:
- the borrowing rate (also called nominal rate), that is to say the interest rate applied by the lending institution;
- insurance premiums where applicable;
- application fee ;
- commissions paid.
The APRC must appear on loan offers since 2010 and the introduction of the Congilaw company. In addition, it must not exceed the usury rate set by the Cream bank, that is to say the maximum rate that consumer loans and home loans cannot exceed.