Auto credit is considered a kind of consumer credit. It follows the same regulations. These laws are in action to protect the borrower and avoid overindebtedness situations. In addition to the global law on consumer credit, 2 laws are applied to auto credit.
The law on consumer credit
In case of subscription to an assigned credit, the borrower has a withdrawal period of 14 calendar days once the contract has been signed. He can then use the form given by his credit agency, or use a model letter of official withdrawal of a consumer credit.
The Scrivener Law
This law is dated 1978 and concerns only auto loans whose loan does not exceed 75 000 $ and whose repayment period is longer than 3 months. It was revised in 2010 for better protection of the borrower.
According to this law, the credit institution has an obligation to inform the borrower. She announced that the contract can only be signed after sending an offer by mail. Once this offer is well received by the borrower, the borrower must have a reflection period of at least 15 days. Once the borrower signs the credit agreement, he or she can benefit from a 14-day cooling-off period.
In addition, the contract must comply with very specific legal regulations, namely:
- The appointment of the identity of all the parties participating in the contract (borrower, credit institution, guarantors);
- The mention of the nature of the good (automobile);
- The sum of the credit requested;
- The title of the contract;
- The date of the signing of the contract.
The Neiertz law
This law is more recent. Dating back to 1991, it complements the Scrivener Act. It takes particular account of the notion of over-indebtedness. With this law, it is essential that the lender keep a copy of the offer of credit. If the borrower finds himself in a situation of debt distress despite the guarantees studied by the lender, commissions are provided to decide an agreement amicably and to regularize the situation.
Finally, this law makes available to banks and financial credit organizations, a file presenting the list of banking prohibitions (the FICP: National File of Credit Incidents to Individuals) in order not to grant a car loan to a person already in debt.
Nevertheless, in the case of over-indebtedness, the Lagarde law allows any borrower to benefit from a delay of treatment of the files of over-indebtedness of 3 months maximum instead of 6. With this law, the duration of registration with the FICP may be reduced if the borrower repays the loan.
Auto credit, like all consumer loans, is framed. The purpose of these laws is to avoid situations of over-indebtedness, and to protect borrowers can accustomed to deal with credit institutions.