French rules, which allow a bank to require a borrower - in return for an individualised benefit - to hold their salary or similar income in a payment account for a maximum of ten years, infringe EU law, the Court of Justice of the European Union ruled on Thursday 15 October (Case C-778/18).
A dispute has arisen between the Association française des usagers de banques (AFUB), a consumer association, and the French State concerning the legality of a decree of June 2017 which lays down, in the French Consumer Code (Article L.313-25-1), the period of up to 10 years during which a lender may require a borrower to direct their income to a bank account.
AFUB brought an action before the French Council of State for annulment of the contested decree which, in its view, infringes the objective of banking mobility enshrined in several European Directives (2007/64, 2014/17, 2014/92 and 2015/2366). In fact, French banks are allowed to attach such advantages to direct debit that giving it up would be prohibitively expensive for the borrower, thus hampering their banking mobility.
Taking up the reasoning of the Advocate General (see EUROPE 12435/13), the Court considers that the obligation of direct debit authorised by the French legislation constitutes a disproportionate measure which infringes EU law. In the Court’s view, the contested article provides an exception to the prohibition of tying. On the other hand, the Court is of the opinion that the period of compulsory direct debit does not constitute a measure contrary to EU law.
Furthermore, the European Court states that the loss of an individual advantage offered by the lender, caused by the closure of the account to which the borrower has directed their income under a credit agreement, does not constitute a charge for closing a payment account and, therefore, does not infringe EU law.
See judgment: https://bit.ly/3nPQ38p (Original version in French by Mathieu Bion)