The rate of usury, also called "threshold of usury" is defined as the maximum annual effective rate (TAEG) at which a loan can be granted to an individual by a credit institution. Any loan offered at a higher rate is considered usurious. The usury rate is regulated by article L314-6 of the French Consumer Code. It is set up by the State in order to protect borrowers from possible abuses by banks and credit institutions.
The usury rate depends on the type of loan, the amount and the duration of the loan. A distinction is made between consumer loans and real estate loans. For example, home loans and construction loans of more than 75,000 euros are divided into five categories:
To calculate the usury rate for a certain category of loan, the Banque de France takes the average effective rate charged by credit institutions during a quarter, and increases this rate by one third. The resulting figure is the usury rate for the following quarter.
For example, the average effective rate charged in the 3rd quarter of 2022 by credit institutions for real estate loans of more than 75,000 euros with a duration of 10 to 20 years was 2.27%. Consequently, the usury rate for these same loans in the 4th quarter of 2022 is 3.03%.
|Average effective rate in
|Usury rate applicable on October 1, 2022|
|Fixed-rate loans with a term of less than 10 years||2,27%||3,03%|
|Fixed-rate loans with a term of between 10 and less than 20 years||2,27%||3,03%|
|Fixed rate loans with a term of 20 years or more||2,29%||3,05%|
|Variable rate loans||2,19%||2,92%|
The usury rate is published in the Official Journal by the Banque de France at the end of each quarter for the following quarter. It is also posted in the "Rates and prices" section of the "Statistics" category of the Banque de France website. The usury rate is detailed for all categories of loans.
The usury rate is set by the Banque de France, which is the central bank of France. Indeed, the Banque de France has monetary, financial and economic missions. Among the services to the economy, we find the protection of households against overindebtedness. As part of the Banque de France, the Autorité de contrôle prudentiel et de résolution (ACPR) supervises the activities of banks and insurance companies.
In the eyes of credit institutions, certain borrowers present an increased risk of default. This is the case of the elderly or of certain people practicing a risky profession. The interest rate applied to them then exceeds the usury rate, and the bank refuses to lend money. To avoid this excess and to be able to benefit from a loan, it is possible to play on the APR (annual effective rate of insurance) by subscribing a less expensive loan insurance in a different establishment.
Article L341-50 of the Consumer Code provides for penalties for credit institutions that exceed the usury rate. Usury is punishable by 2 years in prison and a fine of 300,000 euros. The conviction may be accompanied by other penalties, such as a ban on certain professional activities for up to 5 years.
Source text and photo credit: Le Figaro Immobilier, 07/10/22