French banking regulations to tighten overdraft and credit rules

New banking regulations in France are set to change how credit and overdrafts are managed. Starting November 20, banks will be required to assess the solvency of clients before granting overdraft authorizations, even for amounts under 200 euros. This change follows a European directive aimed at increasing consumer protection and ensuring better information regarding credit fees.

In the broader context of credit applications, banks evaluate borrower solvency by analyzing income, expenses, savings, and existing debts. For real estate loans, the High Council for Financial Stability (HCSF) guidelines generally stipulate that monthly payments should not exceed 35% of income, with loan durations typically limited to 25 years.

Banks are increasingly utilizing automated scoring systems to statistically estimate the risk of default based on financial history and income stability. However, the CNIL notes that credit is not an automatic right, and banks maintain the discretion to refuse applications based on their specific risk assessments.