The final part of the consumer credit reform came into effect yesterday, May 1. In the line of sight of Lite lender: revolving credit. Update on the main measures of this reform.
Loyalty cards reviewed
“From May 1, loyalty cards of stores with revolving credits must obligatorily provide for a cash payment function” , explains Lite lender. In this way, cash payment will be activated as a priority , which will prevent consumers from contracting credit despite themselves. Indeed, until now some loyalty cards have automatically activated a credit, unless the consumer expressly requests not to obtain one. From now on, it will be impossible to take out consumer credit without having applied for it.
Develop classic credit
From now on, “for any request for financing in store or on the internet for an amount of more than 1000 USD, consumers will be offered the choice between conventional credit and revolving credit”. This should prevent certain individuals from being caught off guard.
Accelerate the repayment of revolving loans
Since May 1, revolving credits of less than 3,000 USD will have to be reimbursed in less than 3 years and those of more than 3,000 USD in less than 5 years. The government hopes to reduce the cost of consumer credit. “This reform is a major change from the current repayment terms offered by lenders,” said the minister. According to a study by the consulting firm Athling Management, for a borrowed capital of 3000 USD, 8 lenders out of 16 offered repayment in more than 5 years, with a maximum of 14 years and 10 months.
In addition, if previously a consumer could multiply the drawdowns on his revolving credit without its monthly payment increasing, this practice is no longer authorized. Indeed, the multiplication of credits increased their duration and therefore the total cost. Today, the repayment period will apply even in this case, so it is the monthly payments that will increase and no longer the duration.
Credit Checks on Borrowers
The Lite lender sets new obligations and responsibilities for lenders. Thus, since May 1, they are obliged before offering consumer credit to check the creditworthiness of the borrower and to consult the FICP file which lists incidents of repayment on credits. In addition, “at the point of sale, the person who distributes a credit has the obligation to complete with the consumer-borrower a form which takes stock of his income and his level of debt. For loans over 3,000 USD, this information must be confirmed by supporting documents (identity, domicile, income), ” adds Lite lender.
Strengthening consumer protection
“Before the reform, consumer loans of more than 21,500 USD were not covered by the consumer protection rules of the consumer code , ” said the minister. But from May 1, this ceiling is raised to 75,000 USD. Ditto for the withdrawal period which went from 7 to 14 days.