Beware of instant credits

Receive between 200 and 2,500 euros in twenty-four hours? This is what some establishments offer with instant mini-loans, ignoring the fourteen-day withdrawal period, which can be reduced to seven days at the customer’s request. These loans do exist, however, because they take advantage of a loophole in consumer credit regulations: this only applies to loans with a repayment term of more than three months.

Instant mini-loans, like split payment (payment in instalments, most often at the checkout of the store or e-commerce site) are therefore outside the protective field of credit regulations. “This means in particular that the establishments do not check whether the customer is registered in the file of banking prohibitions, that they are not obliged to display the APR [taux annuel effectif global] and that late payment penalties in the event of non-payment are not regulated”says Matthieu Robin, banking and credit analyst for the UFC-Que Choisir association.

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The Prudential Control and Resolution Authority (ACPR) has taken up the subject. It recalled, on March 31, that only approved companies are authorized to issue mini-loans and that the offers must respect the limits of the usury rate, taking into account the costs for instant payment, which does not was not respected by all the actors.

This summer, the institution pointed out, with regard to mini-loans and split payment, that “these solutions present a risk of poorly controlled or even excessive debt for financially fragile people”.

A European directive

The situation could improve soon: the European directive on consumer credit is currently being revised. It should integrate mini-loans and split payment. “This should be done in the fall, before being transposed into French law within two years. This is an essential step to clean up the market.”hopes Mr. Robin.

Two players, Bling and Cashper, have suspended their mini-loan offering in recent months. That leaves Floa (BNP Paribas group), the fintech FinFrog as well as Boursorama Banque and LCL. Floa has reviewed its pricing policy in order to integrate the costs of immediate payment into its rate, now between 21.01% and 21.10% depending on the amounts, not far from the wear rate (21.11%) . “We’ve never charged for prompt disbursement of funds, and we clearly display the rates right from our homepage”argues, for his part, Riadh Alimi, founder of Finfrog (rate of 20.09%).

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