Faced with the excessive increase in household debt , the French government has been forced to promulgate laws. These various laws make it possible to limit the overconsumption of consumer credits and to protect the consumer. The Lagarde law imposes rules on the consolidation of credits. Why such a regulation? What are the measures? This article supports consumers by explaining the value of the Lagarde law.
The consolidation of credits before the Lagarde law
It should be understood that the repurchase of loans ( real estate as well as consumer ) is a concept which should allow a consumer to relieve himself of his heavy repayments of monthly payments generated by the contraction of various credits. Before the entry into force of the Lagarde law, credit institutions wrongly “took advantage” of the lack of information from consumers to offer credit redemptions at high interest rates without taking into account the debt ratio . The repurchase of credits therefore had no real interest since it increased the debt ratio. This practice can no longer take place.
The entry into force of the Lagarde law: what is changing?
The Lagarde law was introduced in 2010 under the leadership of Christine Lagarde , who at the time was the Minister of the Economy and Finance. This law imposes different rules:
- The loan buyback offer must inform the consumer of the total cost of the new credit, allowing the consumer to make a real comparison. The credit repurchase body must imperatively play on transparency and information.
- The organization proposing the consolidation of credits must inform the consumer of the possible risks of a new loan. Moreover, the Lagarde law requires financial organizations offering loans such as credit consolidation to warn consumers of the dangers of borrowing during advertisements.
- The organization must also make the proposal to settle the outstanding loans to the borrower.
- When redeeming mixed loans (mortgage loan with consumer loans), the establishment is required to apply a real estate rate if the remaining part to be repaid of all consumer loans is equal to or greater than 60% of the remaining part due from mortgage loans.
- The Lagarde law authorizes borrowers to take out insurance with 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 these stated measures obviously only concern the consolidation of credits . There are many other measures in favor of consumer credit, microcredit or even the withdrawal period . The Lagarde law aims to limit household indebtedness while offering solutions adapted to their situation.
The consolidation of loans is a solution more and more popular with households who feel in financial difficulty. Always take the time to simulate, compare, and discuss with financial advisers. The goal is to allow you to improve your lifestyle and not to get into debt.