Credit agreement in the event of payment default on the initial credit agreement

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Summary:

If you are already in default on your initial credit agreement, the professional lender may enter into a new credit agreement with you, stipulating payment terms with specific repayment methods. This will enable you to avoid legal proceedings for payment default and provisions that are less favourable than those of the initial credit.

In addition to the traditional consumer credit agreement, there are more specific agreements, such as credit agreements that provide for payment terms if you are already in default on the initial agreement. The repayment methods are thereby subject to an agreement between you and the lender.

This will enable you to:

  • avoid legal proceedings for payment default; and
  • not be subject to provisions that are less favourable than those of the initial agreement.

Who is concerned

Professional lenders, professionals operating as consumer credit intermediaries, and consumers who are entering into or who have entered into a consumer credit agreement.

Prerequisites

Lenders or professionals operating as a consumer credit intermediary are subject to an obligation of pre-contractual information.

To enable you to make an informed decision about entering into a credit agreement, the lender or the credit intermediary must, before entering into the agreement, provide you with the information required to compare different offerings, on the basis of:

  • the clauses and terms and conditions of the credit being offered;
  • the preferences you have expressed;
  • the information you have provided.

The information you receive:

  • must be provided:
    • in hard copy or on another durable medium (e.g. by email); and
    • on the basis of a special form ('standard European consumer credit information');
  • must include in particular:
    • the type of credit;
    • the total amount of credit;
    • the term 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.

See the full list of information (French, Pdf, 150 Kb) to be provided to you by the lender or credit intermediary.

If, during a telephone conversation, you ask that the lender implement the overdraft facility immediately, they must provide you with the following information:

  • 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.

If you request a copy of the draft of the credit agreement, the lender may:

  • send it to you, free of charge, with all the required contractual information; or
  • not send it to you if, at the time of your request, they know that they will not enter into the agreement with you.

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.

How to proceed

Conclusion of the contract

The credit agreement is drawn up:

  • in hard copy or on another durable medium;
  • in 2 copies, signed by the parties.

The following information must appear in the agreement that was entered into through mutual agreement between you and the lender:

  • the type of credit;
  • the term of the credit agreement;
  • the total amount of credit and the direct debit conditions;
  • the interest rate;
  • where applicable, the amortisation schedule, etc.

See the full list of information (French, Pdf, 327 Kb) that must appear in the agreement.

If, according to the agreement, the payments you make do not immediately repay the amount you borrowed but serve to reconstitute the capital in the periods and under the terms stipulated in the credit agreement or an ancillary agreement, the agreement must clearly state the risk for you if you are unable to repay this credit in full by the due date, unless you have a specific guarantee.

If the agreement was entered into at your request using a remote communication channel that does not enable the provision of the required contractual information, the lender must share this information with you immediately after the agreement is entered into.

Contractual obligations

You must be notified, on a durable medium:

  • of any change in the lending rate (interest rate):
    • before the rate change takes effect;
    • if this change in the lending rate does not result from a publicly disclosed reference rate;
  • of the amount of the payments to be made after the new rate takes effect;
  • of the number and frequency of the payments.

Early repayment

Repayment procedure

At any time, you may:

  • notify the lender, either in writing or on another durable medium, of your intention to repay the credit; and
  • repay the credit early, either in full or in part.

Once the lender is notified that you wish to repay the credit early, they will promptly disclose to you:

  • the exact amount of the total reduction of the credit, which is equal to the interest and costs due for the remainder of the agreement;
  • where applicable, the amount of the compensation you must pay them.

Compensation to be paid to the lender

If you make an early repayment, you may need to pay the lender a compensatory amount that is fair and objectively justified by any costs related directly to the early repayment, if:

  • the amount of the early repayment exceeds EUR 10,000 over a one-year period;
  • the early repayment occurs in a period for which the lending rate is fixed.

No compensation is due:

  • if the early repayment is made in connection with an insurance contract that guarantees the repayment of the credit; or
  • if there is an overdraft facility on a bank account; or
  • if the early repayment occurs in a period for which the lending rate is not fixed.

The amount of the compensation may not exceed:

  • 1% of the repaid amount, if the length of time remaining until the agreed termination of the credit agreement exceeds one year;
  • 0.5% of the repaid amount, if the length of time remaining until the agreed termination of the credit agreement does not exceed one year.

If the lender can demonstrate that they suffered harm that exceeds the ceiling set by law, they can, as an exception, claim compensation:

  • that exceeds this ceiling;
  • that equals the harm actually suffered; otherwise, you can claim a corresponding reduction.

In any event, the compensation for early payment that must be paid to the lender may not exceed the sum of the interest you would have had to pay if the agreement had been performed until the end of its term.

Who to contact

  • Luxembourg Consumer Protection Association (ULC)

    Address:
    55, rue des Bruyères L-1274 Howald
    Phone:
    (+352) 49 60 22 1
    Fax:
    (+352) 49 49 57
    Email address:
    info@ulc.lu
    Website:
    https://www.ulc.lu
    Closed ⋅ Opens at 8.00
    Thursday:
    8.00 to 12.00
    Friday:
    8.00 to 12.00
    Saturday:
    Closed
    Sunday:
    Closed
    Monday:
    8.00 to 12.00
    Tuesday:
    8.00 to 12.00
    Wednesday:
    8.00 to 12.00
    In the afternoon only by appointment.

  • Luxembourg Consumer Protection Association (ULC)

    Luxembourg Commission for Travel Litigation (CLLV)

    Address:
    55, rue des Bruyères L-1274 Howald
    Phone:
    (+352) 49 60 22 205
    Fax:
    (+352) 49 49 57
    Email address:
    contact@cllv.lu
    Website:
    https://www.ulc.lu

European Consumer Centre

Address:
271, route d’Arlon L-1150 Luxembourg
Phone:
(+352) 26 84 64 1
The telephone helpdesk is open on Mondays, Wednesdays and Fridays from 9.00 to 12.00 and on Tuesdays and Thursdays from 9.00 to 16.00.
Fax:
(+352) 26 84 57 61
Email address:
info@cecluxembourg.lu
Website:
https://www.cecluxembourg.lu/en/contact-and-opening-hours/
Consultation by appointment

Related procedures and links

Procedures

Links

Further information

Legal references

Code de la consommation

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