Home loan: can the bank force you to sell your house in 15 days?

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2 min

The Court of Cassation ruled in favor of a borrower who was unable to repay his mortgage. Despite his unpaid debts, Crédit Agricole cannot force him to sell his house in just 15 days to repay his loan.

A project that is – on the face of it – could not be more ordinary. As spotted by UFC-Que choisir, Mr. X signed a mortgage loan with Crédit Agricole de Lorraine on July 18, 2011. He wanted to make a real estate investment and borrowed 220,000 euros over 10 years at a rate of 4.05%. But Mr. X, who was experiencing financial difficulties, did not honor the repayment of several of his loan instalments. So, 7 years later, on April 18, 2018, he received a bailiff’s letter ordering him to repay the missing instalments. Failing this, the bank would order the “forfeiture of term” credit, and will therefore require repayment of the remaining capital, interest and compound late payment interest – interest is included in the capital and in turn generates interest. And that’s without taking into account a new layer of costs provided for in the contract: an additional penalty corresponding to 7% of the remaining capital due and unpaid interest.

Mr. X refuses to comply and does not sell his property in order to pay off his debt. He receives the forfeiture notice in his mailbox on June 20, 2018. In the process, he is summoned by Crédit Agricole before the Sarreguemines High Court. And the bank wins its case. The court considers that Crédit Agricole is legitimate in its request and that the forfeiture of the loan term was duly pronounced, in accordance with the terms of the loan agreement signed with the borrower. If the 15-day period imposed on the borrower is validated, the fixed compensation of 7% demanded by the bank is, however, reduced, it appearing “manifestly excessive” given the low loss suffered by the bank.

A clause “abusive”source of “imbalance”

Dissatisfied with this decision, Mr. X appealed to the court of second instance. The Metz Court of Appeal was not of much help to him since it confirmed the decision of the first instance. The bank was indeed entitled to claim the sum of 105,282 euros within 15 days. The court also considered that since the loan rate (4.05%) was quite low, the 7% criminal compensation claimed by the bank was not “excessive”. Capitalized interest was, however, refused, this practice being prohibited in the context of early loan repayment.

Last chance for our borrower: the Court of Cassation, which will rule on March 22, 2023. And in a turn of events, for the highest legal authority in the country, the clause requiring the borrower to pay the sum within 15 days is “abusive”because source of “significant imbalance between the rights and obligations of the parties, to the detriment of the consumer”The Court considers that this notice is not a “reasonable duration”in view of the significant financial consequences for the borrower. Especially since the bank’s summons was not even accompanied by a mechanism “of a nature to allow the regularization of such late payment”such as debt spreading. The 7% penalty imposed on the borrower is also considered “disproportionate” and must therefore be reduced by the Colmar Court of Appeal, which inherits the case. The capitalized late payment interest was also abandoned, for the same reasons as the Metz Court of Appeal.