Credit agreements in the form of overdraft facilities

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Summary:

A credit agreement in the form of an overdraft facility is when a professional lender expressly allows you, as the consumer, to access more funds than what is available on your current account.

In addition to the traditional consumer credit agreement, there are more specific agreements, such as credit in the form of an overdraft facility, repayable:

  • upon request; or
  • within 3 months.

With this type of credit agreement, the lender expressly allows you to have access to funds that exceed the balance of your current account.

Who is concerned

Professional lenders and consumers who expressly enter into a consumer credit agreement in the form of an overdraft facility.

This type of credit is repayable upon request or within 3 months.

Agreements that stipulate that you must repay the amount within one month do not fall within the scope of the provisions presented herein.

Prerequisites

In this type of consumer credit, the lender or credit intermediary is subject to an obligation of pre-contractual information.

To enable you to make an informed decision about entering into a credit agreement, the lender 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; and
    • on the basis of a special form ('standard European consumer credit information');
  • should include, in particular:
    • the type of credit;
    • the total amount of credit;
    • the term of the credit agreement;
    • the interest rate, but not necessarily the EAR (effective annual percentage rate, which includes the interest rate and all the costs related to the credit, such as administrative charges, mandatory insurance and other ancillary costs);
    • the procedures for exercising the right of withdrawal from the credit agreement;
    • 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 the consumer 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;
  • a warning that you may be asked to repay the total amount of the credit at any time.

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

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.

Preliminary steps

Before entering into an agreement, the lender must check your creditworthiness. So they can do this, you are required to forward to them all the information they need for this verification:

  • your ongoing financial commitments (loans); and
  • your current income (salary, pension, etc.).

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.

For credit agreements entered into in the form of an overdraft facility, you should receive clear and concise information about:

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

See the full list of information (French, Pdf, 148 Kb) that must appear in the agreement.

If, according to the agreement, the payments you make do not immediately repay the amount you borrowed, 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

Once the agreement has been established, you will be updated regularly though a dated statement – provided in hard copy or on any other durable medium – that shows:

  • the amounts withdrawn and the dates of the withdrawals;
  • the previous statement balance;
  • the new balance;
  • the amounts paid and the dates of the payments;
  • the applicable lending rate;
  • all costs that have been applied;
  • if applicable, the minimum payment amount.

Before any rate change takes effect, you will also be notified of:

  • a change in the lending rate (interest rate) if it does not result from a publicly disclosed reference rate;
  • costs for which you are liable.

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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