Start your consolidation loan to pay off payday loans
Consolidating several loans and combining them into one credit is a “banking transaction” accessible to all. Whether it is getting out of an excessive debt situation, rebalancing your family budget or anticipating a change in the situation (such as retirement for example), buying back credits can be the solution. For borrowers, a legal and regulatory framework governs the repurchase of credits. Since the 1970s, and until the modifications made by the consumer credit reform in 2010 by Christine Lagarde, the grouping of loans has always been more secure and explicit. Let’s take a look at these consolidation loans to pay off payday loans.
The first document to which we must refer to find a strict framework, the Consumer Code. In its article R 313-12, it gives a definition of what exactly is a grouping. It is a “credit transaction (having) the purpose of reimbursing at least two previous receivables including a credit in progress.
This article explains very clearly the role of the lender. Thus, Intermediaries in Bank Operation and Payment Services (IOBSP), like Credither, must, “after dialogue with the borrower, (deliver) a document in order to guarantee its good information. […] The lender or intermediary responds to any request from the borrower for an explanation concerning this document ”.
The contributions of the law on consumer credit (Lagarde law)
Since July 1, 2010, and the vote on the law on consumer credit, also known as the Lagarde law, the framework surrounding credit operations, and in particular the repurchase of credits, is now harder. This is great news for borrowers because they have better information.
The law thus imposes advertising rules. Any communication or proposal directly addressed must mention the nature of the interest rate (fixed or variable for example), the overall effective annual rate (APR, excluding insurance) or the total amount due. They must be presented in a clear, precise and visible manner. The same goes for the number of maturities or the cost of insurance.
No surprises for consumers who carry out a loan repurchase transaction. Note that another law is essential in the phase of seeking a buyout offer, the Murcef law (law of urgent economic and financial reform measures), passed in 2001. The latter explains that an intermediary cannot impose on its customers a settlement of a sum of money before the signing of a loan offer. As long as you have not signed a loan or consolidation offer, you have nothing to pay!
The Scrivener law, a “historic” law for the repurchase of credits
To provide protection to borrowers in the face of mortgage credit drifts, the Scrivener law was implemented in January 1978. This law set out the contractual outlines for a mortgage, restricting the freedom of lenders. It is the first major law to protect consumers and is still in force today. It notably imposes rules on information (communicating the total cost and duration of a loan), and has set up the right to a period of reflection and withdrawal.
This is essential, especially in the context of a loan buy-back, so that borrowers can make their choice with complete peace of mind and with full knowledge of their contract. A distinction is made between the Scrivener 1 law, relating to the consumer sector, and the Scrivener 2 law, which applies more particularly to the real estate sector.
Neiertz law and over-indebtedness
Debt restructuring is a banking operation that can be used to help households in debt distress. By spreading out the repayments of several loans over a new period, it is possible to limit the weight of the monthly payments, and therefore find a lower debt ratio, in return for a longer total repayment period.
The Neiertz law regulates the over-indebtedness of households. It enabled the creation of over-indebtedness commissions. At the turn of the 2000s, the personal recovery procedure (which allows partial or total debt cancellation in the absence of a solution) was built on the basis of this law.