You have taken out a mortgage or a consumer loan that you have not repaid. Years later, you are contacted again by the credit institution or the debt collector. Indeed, banks often sell their debts to third parties at a significant discount. What you do not know is that you can buy back your debt at the transfer price, which is much lower than the face value of your debt. Clearly, the assigning and assignee creditors have seen fit to hide the price of this assignment, preferring to protect their financial interests rather than respecting the debtor protection rules whose objective is to: “curb the greed of purchasers of disputed rights“, Pothier.
The prescription of real estate loans
In France, home loans granted to consumers by credit institutions are subject to a limitation period of 2 years. According to Article L. 218-2 of the French Consumer Code, if the lender does not act within this period, the debtor is no longer obliged to repay the debt.
A prescription that you must invoke
If you are approached by a credit institution or its agent to settle a debt, you must object that the time limit for claiming it has passed. It is up to you to show that the conditions for the application of the statute of limitations have been met (starting point of the period, absence of interruption or suspension of the period).
Indeed, if the dispute is brought before the courts, the magistrate cannot note ex officio that the debt is time-barred. However, it is clear that creditors can seek to recover sums that are time-barred, even before the courts.
The starting point of the limitation period
When the action for payment concerns only unpaid monthly instalments, the period runs from the due date of each unpaid monthly instalment.
If a borrower does not pay his instalments despite formal notices, the credit institution may declare the “forfeiture of the term”, i.e. it requires the immediate payment of the total amount still due. In this case, the time limit for the lender’s action for repayment of the capital runs from the date of this forfeiture of the term.
The interruption or suspension of the limitation period
A limitation period may be interrupted or suspended by certain events. It is, for example, interrupted when a person unequivocally admits to owing the sum (acknowledgement of debt, request for a grace period, etc.). For this reason, your creditor will do everything to get you to acknowledge the debt, including agreeing to you paying a deposit of 50 euros. We frequently see people who thought they were getting a good deal by agreeing to a favourable payment schedule. They should not have signed because they did not owe anything more.
The effect of the interruption or suspension of the limitation period
The interruption of the time limit immediately starts a new time limit of the same duration as the old one. Suspension of the time limit temporarily stops its running without erasing the time limit already run.
Articles 2230 and 2231 of the Civil Code.
Foreclosure of consumer loans
This period is two years and cannot be interrupted. When a consumer credit is not repaid by the borrower, the credit institution must bring an action for payment within 2 years of default. This period also applies to actions by the lender against the debtor’s guarantor.
The starting point of the foreclosure period
The two-year period starts, in principle, from the first unpaid credit incident. In the case of revolving credit, the time limit begins when the total amount of credit granted is exceeded without being rectified.
On the other hand, in the case of a bank overdraft, the time limit starts three months after the authorised amount of the overdraft has been exceeded.
Finally, when there is a rescheduling of the debt, the foreclosure period starts from the first unpaid incident after the credit rescheduling.
The effect of the interruption or suspension of the foreclosure period
A foreclosure period cannot be suspended or interrupted, except by an act of forced execution (seizure of a bank account, seizure of property, etc.) or by legal action, even in summary proceedings.
Thus, for example, the period of foreclosure is not interrupted by
- an acknowledgement of debt by the consumer, in particular during exchanges or attempts to reach agreement with his bank
- the resumption of payments by means of direct debits from the borrower’s account
- the postponement of unpaid instalments at the initiative of the lender.
An objection to be raised by the debtor
As with the statute of limitations for a mortgage, the debtor must raise the foreclosure of the action for payment with the lender.
On the other hand, when the dispute is brought to court, if the debtor forgets to raise the foreclosure of the lender’s action, the judges are obliged to do so in his place.
The consumer can thus be saved by the judge.
Effect of the foreclosure of the creditor’s action on the debt
Foreclosure prevents the creditor from going to court to recover the debt. But this does not mean that the debt is extinguished.
Thus, you can still be reminded amicably by the lender or a bailiff to obtain payment. However, the lender can no longer force you to pay it in court, nor can it seize you for lack of action or prior authorisation from a judge within the time limit.
Similarly, the claim may be validly purchased by a third party who must, in order for this assignment to be enforceable against you, inform you of it by means of a notification. This third party can always seek payment out of court.
Judges as consumer protectors
Recently, the Amiens Court of Appeal sought to curb the unfair and abusive practices of debt collection companies by noting the unenforceability of the assignment to the consumer.
The judges noted that: “the means given by the law are no longer ordered to the payment of the debt, but to the realization of a profit by a fund devoted to speculation to the detriment of consumers, which diverts them from their legal purpose. The court cannot accept the opposability of the transfer to Mr Y and the validity of the proceedings initiated by the company EOS against him.
Consult our association to know if you can benefit from it
Our association, which specialises in the protection of victims, will be able to tell you whether your debt is foreclosed or time-barred.
If this is the case, we will put you in touch with lawyers who will assert your rights.