Credit agreements in the form of overdraft facilities

In addition to traditional consumer credit agreements, there are more specific agreements, including loans by way of overdraft facilities repayable on demand or within three months.

These are credit agreements under which a lender expressly grants consumers access to funds in a greater amount than the available balance in their bank account.

Who is concerned

These loans are entered into between professional lenders and consumers who enter into a consumer credit agreement in the form of an overdraft facility, repayable on demand or within a period of three months.

Contracts that are repayable within one month are not within the scope of the provisions described below.

Prerequisites

For contracts in the form of an overdraft facility, the lender or credit intermediary is subject to an obligation to provide pre-contractual information.

Thus, before entering into a contract, the lender or credit intermediary must provide the consumer with the information necessary to compare the various offers and make an informed decision as to whether to enter into a credit agreement. This information includes the clauses and credit conditions being offered on the basis of the preferences expressed and the information provided by the consumer.

The information must be provided either on paper or on another durable medium, such as a CD, using a specific form (the "Standard European Consumer Credit Information Form"), and include, in particular:

  • the type of credit;
  • the total amount of credit;
  • the duration of the credit agreement;
  • the interest rate;
  • if applicable, the length of time for which the lender is bound by the pre-contractual information, etc.

It is not necessary to inform the consumer of the EAPR.

See the full list of information to be provided to the consumer by the lender or credit intermediary.

In the case of communication by telephone, and if the consumer asks for the overdraft facility to be immediately available, the following information must be provided to the consumer:

  • the total amount of credit;
  • the lending rate, as well as all of its components;
  • the effective annual percentage rate, illustrated through representative examples;
  • the terms and conditions for termination of the credit agreement;
  • a warning that the consumer may be asked to repay the total amount of the credit at any time.

The same is true for credit agreements granted in the form of an overdraft facility repayable within one month.

At the consumer's request, the consumer must also receive, at no cost, a copy of the draft credit agreement containing the information that must be included in all credit agreements, to the extent that the type of agreement entered into is subject to the obligation to include such information in the credit agreement. If at the time of the request, the lender knows that it will not enter into an agreement with the consumer, it is not required to send the consumer a copy.

It should be noted that these pre-contractual obligations do not apply to suppliers of goods or services who act as credit intermediaries as a secondary line of business.

Preliminary steps

Before concluding a contract, the lender must check the consumer's creditworthiness. Consumers are required to communicate all necessary information to the lender, such as current financial commitments (loans) and regular income (salaries, pension, etc.).

How to proceed

Conclusion of the contract

The credit agreement is drawn up on paper or on any other durable medium and each party receives a signed copy.

For credit agreements entered into in the form of an overdraft facility, the information is provided in a clear or concise manner, including:

  • the type of credit;
  • the duration of the credit agreement;
  • the procedures for exercising the right of withdrawal from the credit agreement, etc.

See the full list of information to be provided in the agreement.

If the agreement specifies that the payments made by the consumer do not immediately amortise the credit, the contract should clearly state that the credit agreement does not provide for a guarantee of repayment of the total amount of the credit under the credit agreement, unless such a guarantee is given.

If at the consumer's request, the agreement is entered into using a remote means of communication that does not enable such information to be provided, the lender must send the required contractual information immediately after conclusion of the contract.

Post-contractual obligations

Following the conclusion of the contract, the consumer must be regularly provided with an account statement, on paper or on another durable medium, that includes the following information:

  • the specific period to which the account statement relates;
  • the amounts withdrawn and the dates of the withdrawals;
  • the balance on the previous account statement and the date thereof;
  • the new balance;
  • the dates and amounts of the payments made by the consumer;
  • the applicable lending rate;
  • all expenses that have been applied;
  • if applicable, the minimum payment amount.

The consumer must also be informed of any increases in the lending rate and any expenses that the consumer must pay before such changes enter into effect, unless the change is the results of a reference rate, the rate is published, and the information is available on the lender's premises. In that event, notice of the change in the lending rate may be made be sending an account balance.

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