It is not impossible to have a very high debt ratio and it is not certain that the bank is making a mistake by granting credit under these conditions if the “remainder to live on” seems sufficient to the judge.
The Court of Cassation admitted that individuals could have had a debt ratio by almost 65%. However, in order to prevent excessive indebtedness of economic agents, the High Council for Financial Stability, in a decision of September 29, 2021, had decided: the effort rate of real estate loan borrowers does not exceed 35%.
No excessive debt if the remaining living expenses exceed 3000 euros for a couple
Before that, credit institutions historically set a maximum debt rate for individuals of 33 to 35%, but this was a usage rate and not a legal rate. In the judgment of the Court of Cassation, on the other hand, the judges expressly set aside the criterion of the debt ratio and consider that there is no no risk linked to excessive debt if the credit burden leaves a living balance of more than 3000 euros for a couple. And in this case, depending on the repayment periods, the couple’s remaining living amount, before paying their expenses, was 3500 to 3780 euros.
The magistrates considered that these 3000 euros were a sufficient amount for the couple’s daily life and that, having such a sum, consumers cannot be threatened by excessive debt which would justify a warning from the lender.
However, in the case judged by the Court of Cassation, the couple who claimed compensation from the bank for not having fulfilled their duty to warn had, thanks to the critical credit, reorganized its debts and reduced its debt ratio.
(Cass. Civ 1, 12.7.2023, K 22-11.321).
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