Three important decrees were published in the official journal on July 1. The first aims to implement a $ 3 offer for badly indebted borrowers. The 2nd decree obliges banks to notify their customers 14 days before a bank fee is charged. Finally, the 3rd decree creates an Observatory on banking inclusion. Focus on what these measures will change for borrowers. More of this story: bigjude.com
Who is the Badly Debted Borrower?
The typical profile of the badly indebted borrower is the individual who has taken out too many consumer loans. He is mainly in a relationship, and when he lives alone he is mostly divorced or separated. It is mainly in the 35 to 54 age group, and most of them are employees on permanent contracts.
Its average property debt is $ 100,820, its average consumer debt is $ 23,230. Generally speaking, the average bad debt must still reimburse $ 38,064 (source Cream Bank).
The vicious circle of over-indebtedness
When a bad debtor finds himself in default on some of his monthly payments, the door of the banking system closes before him. He finds himself deprived of means of payment because registered with the FCC (Central File of Checks), and paradoxically his bank bill increases. Because he is billed various costs when a permanent transfer has failed, or when a payment is not funded.
In the end, far too many of these poorly indebted borrowers find themselves registered with the FiCP (Personal Credit Incident File), with now very little chance of restructuring their loans.
Mandatory provision of means of payment
The decree published in the official journal on July 1, will force the banks to issue an offer at $ 3 for the attention of bad debt. Big news: this offer must include a payment card accompanied by various banking services. The services in question should be more complete than those currently offered.
This measure will come into effect on October 1, the cost of the package of $ 3 will be annually adjustable according to inflation excluding tobacco.
This offer is particularly aimed at customers declared to be in debt. They are approximately 200,000 each year to have their file accepted by the departmental commissions of the Cream Bank. But they will not be the only beneficiaries, individuals registered for at least 3 consecutive months at the FCC will be entitled to this package at 3 $.
However banks will have the option to include other of their customers at discretion. The decree specifies that a bank may apply this package to some of its customers, depending on “the existence of account irregularities or payment incidents as well as their repeated nature observed for three consecutive months”. The decree will also allow banks to take into account the “amount of resources credited to the account”.
New information requirements for banks in 2016
By January 2016, banks will have the obligation to notify their customers at least 14 days before a bank fee is charged. The monthly payments of the credits are generally regulated by automatic withdrawal, or when one of these withdrawals is rejected, the bank has the right to invoice expenses of rejection, without even notifying the interested party.
On the effective date of the decree, this will no longer be possible. The badly indebted borrower will be notified 14 days before. The operations concerned are also the costs of prior information for bad checks, as well as the costs of opposing the blocking of a payment card.
Creation of a banking inclusion observatory
A 3rd decree published on July 1 presents the creation of a banking inclusion observatory. Its role will be to observe the actions of banks in terms of access and use of its banking services. The observatory will be responsible for proposing solutions to allow more individuals to have access to an ever wider range of banking services.
The report will be published annually by the Cream Bank, and is expected to shorten the distance between the banking system and badly indebted borrowers.
How do we get to bad debt?
The majority of badly indebted borrowers in France have suffered a loss of income. We are far from the image of the spending consumer who takes out loans without worrying about their repayment capacity. It may be a couple in which one of the members is unemployed, and whose missing share of income no longer allows them to maintain a standard of living as before.
One of the other typical situations is that of the self-borrower who is still active, but who has missed a large client. He may collect part of the amount due in several months by court order, if there is one. But meanwhile the urgency is to restore its financial situation.
One solution: lower your monthly payments
The operation of lowering the monthly payments of a borrower is called credit repurchase. A broker will focus on finding a financial organization to consolidate all of the borrower’s loans. The latter will ultimately obtain a single monthly payment, the amount of which is less than the totality of all the monthly payments he previously paid.
This device has 2 advantages. The first is of course to give oxygen to the borrower’s budget. But above all, the fact that there is only one monthly payment will help him better manage his budget.
Ideally, the repurchase of credit would be done by minimizing the duration of the repayments as well as possible, in order not to increase the cost of the credit. In practice, it is mainly the budget of the badly indebted borrower which determines the amount of the monthly payment necessary, and therefore the duration of the repayments.
In any event, it is important to intervene before submitting an over-indebtedness file to the Cream Bank. Because once the file is accepted, the credit organizations will no longer be able to restructure the finances of the over-indebted. The first reflex to have when you are a badly indebted borrower, is to consult a broker in repurchase of credit.