The Prudential Control and Resolution Authority, credit watchdog, revealed Tuesday in an investigation that several mini-credit organizations were non-compliant with regulations in terms of interest rates and consumer information.
The banking policeman, the ACPR, notably warned about the methods for calculating the overall effective rate (TEG) of several establishments, which would not take into account the costs linked to the accelerated provision of micro-credit in the calculation of the TEG. It is, however, mandatory.
Micro-loans make it possible to make a sum available immediately or within 14 days. On average, the loan amount was of nearly 600 euros in 2020, according to the credit constable, for a maximum of 3000 euros. The market is growing strongly, with +50% of loans distributed in volume in the first quarter of 2021, compared to the same period in 2020.
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The ACPR noted an average TEG of 20.94% on mini-credits, a figure close to the usury rate, the maximum legal interest rate, set at 21.16%. For the split loans (buy now, pay later) of 200 euros repayable over 90 days, the average rates also come close to the authorized limit (19.64%).
A high risk of poorly controlled or even excessive debt
These financing solutions can present a high risk of poorly controlled or even excessive debt for the most financially fragile people, warned the Authority. It also reports payment incidents on 29% of mini-loans taken out.
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The ACPR also noted two breaches of the regulations concerning consumer information before the signing of contracts, in particular on additional costs and a vocabulary that was not always sufficiently explicit in advertisements for split loans. Two companies have also declared repayment periods of more than 90 days, a situation contrary to the law, she further pointed out.
Up to 130 € offered comparing best online banks
In April 2021, the consumer association UFC-Que Choisir filed a complaint with the Paris public prosecutor against three specialized establishments, denouncing misleading commercial practices.
Mini credit of 600 euros: UFC-Que Choisir files a complaint for misleading practice
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