As mentioned in the second issue of the Update, the
issue of recording loans in a register is highly sensitive in
France. A tentative draft provision aiming at creating a consumer
credit register recording all consumer credits was ruled contrary
to the Constitution on the basis that it would disproportionately
encroach on privacy rights. As a result, the existing National
Register of Household Credit records only debt repayment incidents
meeting a number of criteria. Consulting such register for the
purposes of assessing borrowers' creditworthiness is mandatory
for credit institutions engaging in consumer lending in France.
Failure to comply with this requirement results in forfeiture of
the creditor's entitlement to contractual interest and
automatic entitlement to interest at the statutory rate increased
by five percentage points in the vast majority of cases. This
five-point margin may paradoxically result in the amounts that the
creditor is likely to receive following application of the penalty
being actually higher than those that it could have received if it
had complied with its contractual obligations. The Court of Justice
of the European Union ruled on March 27, 2014 in Case C-565/12 that
in such instances, the penalty is not genuinely dissuasive.
In addition, on April 28, 2014, the French Data Protection Authority issued a notice to comply with applicable regulations against a bank for recording in the National Register of Household Credit repayment incidents that do not meet the requirements set out in French law and for maintaining record of repayment incidents beyond the legally prescribed period of time despite repayment of their debt.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.