Faced with the excessive increase in household over-indebtedness, the French government has been obliged to enact laws. These various laws make it possible to limit the overconsumption of consumer credit and to protect the consumer. The Lagarde Act imposes rules on the grouping of credits. Why such regulations? What are the measures? This article accompanies the consumer by explaining to him the interest of the Lagarde law.
Consolidation of credits before the Lagarde law
It must be understood that the purchase of loans ( real estate and consumer ) is a concept that should allow a consumer to relieve his heavy repayment of monthly payments caused by the contraction of different credits. Prior to the entry into force of the Lagarde law, credit institutions “misused” the lack of information from consumers to offer buybacks at high interest rates without taking into account the debt ratio. The redemption of the credits was therefore of no real interest as it increased the debt ratio. This practice can no longer take place.
The coming into force of the Lagarde law: what changes?
The Lagarde law was introduced in 2010 under the leadership of Christine Lagarde, who at the time was the Minister of Economy and Finance. This law imposes different rules:
- The offer of loan buybacks must inform the consumer of the total cost of the new credit, which allows the consumer to make a real comparison. The credit buy-back organization must play on transparency and information.
- The body proposing the credit consolidation must inform the consumer of the possible risks of a new loan. Moreover, the Lagarde law requires financial organizations offering credits such as loan aggregations to warn the consumer of the dangers of a loan during advertising.
- The organization must also make the proposal to pay the outstanding credits to the borrower.
- When buying mixed loans (mortgage loans with consumer loans), the institution is obliged to apply a real estate rate if the remaining portion to be refunded of all consumer credit is equal to or greater than 60% of the remaining share due of real estate loans.
- The Lagarde law allows borrowers to take out insurance in another organization. This proposal is in favor of borrowers since it reduces the total cost of credit.
- The Lagarde law imposes a verification of the household debt ratio.
All of these measures, of course, only concern the grouping of credits. There are many other measures in favor of consumer credit, microcredit and the withdrawal period. The Lagarde law aims to limit the indebtedness of households while proposing solutions adapted to their situation.
The pooling of loans is an increasingly popular solution for households that feel financially strained. Always take the time to simulate, compare and discuss with financial advisors. The goal is to enable you to improve your lifestyle and not to get into debt.