Bank charges: when the annual percentage rate must be proved in writing

Do you live in Vitry-le-François and has your bank just charged you €1,200 in overdraft fees on your current account? Like many, you are probably wondering whether these charges are legitimate. The question is crucial: behind opaque lines of figures, your family budget may be at stake. What does the law say? The Court of Cassation, in a judgment of 24 June 1997, ruled: for the overdraft fees to be valid, the bank must prove that it communicated the annual percentage rate (APR) to you in writing before deducting them. This is a landmark decision that could allow you to challenge sums wrongly charged.

The facts: a story that happens every day

Mr X, a homeowner in Vitry-le-François, opened a current account with the Banque Populaire de la région économique de Strasbourg. Like many, he used his account for his current and professional expenses. One day, the overdraft increased, and the bank began to levy overdraft fees (interest charges on the overdraft). Unhappy, Mr X contested the amount of the fees, claiming that the bank had not correctly calculated the interest. The bank then sued Mr X for payment of 51,787.89 francs (about €7,900).

The Strasbourg High Court (tribunal de grande instance) ruled in favour of the bank at first instance. Mr X appealed. The Colmar Court of Appeal upheld the judgment: according to it, the periodic account statements mentioned the annual percentage rate (APR), which was sufficient to justify the overdraft fees. But Mr X was not satisfied: he considered that the bank should have provided him with a written document before the fees were levied, and not just on the statements.

He therefore appealed to the Court of Cassation. The Court of Cassation examined the case and quashed the Court of Appeal's decision. For the judges of the High Court, the Court of Appeal had not verified an essential point: had the bank actually given Mr X, before levying the overdraft fees, a written document mentioning the APR? The mere indication on the periodic statements is not enough, because these statements are sent after the event. A prior document is required, such as the credit facility agreement or an information notice.

The reasoning of the court — explained

The heart of the dispute concerns the application of Articles L. 313-1 et seq. of the Consumer Code (now codified, but at the time contained in the Law of 28 December 1966). These provisions require that the annual percentage rate (APR) be stated in any document evidencing a loan or credit. For a current account with an overdraft, case law considers that the credit facility agreement constitutes such a document. If the bank cannot prove that this document was given to the customer before the overdraft was used, the overdraft fees are not due.

The Court of Cassation therefore criticised the Court of Appeal for failing to find that, in addition to the indication of the APR on the periodic statements, the mention of a corresponding APR with worked examples appeared in the credit facility agreement or in any other document received by the customer prior to the levying of the overdraft fees. In other words, the bank must prove that it properly informed the customer of the cost of the credit before charging interest.

This decision is part of a line of case law protecting consumers. It confirms that the formalities imposed by the Consumer Code are not a mere formality: they are intended to enable the customer to compare offers and make an informed decision. Without this prior information, the bank cannot claim the interest, even if the customer knowingly used the overdraft.

What this means for you — in practice

If you are a landlord in Tinqueux and use a business account with an overdraft, this decision directly concerns you. Imagine that your bank charges you €800 in overdraft fees for a quarter. If it cannot prove that it gave you a written document mentioning the APR before the overdraft began, you can contest these charges. You could obtain a refund of the overdraft fees, or even compensation for the loss suffered.

For a tenant, the situation is different, but the principle remains valid: if you borrow for your home or use revolving credit, the bank must inform you of the APR in writing before releasing the funds. Without this, the interest is not due.

A buyer financing a property purchase with a loan must also check that the bank has given them a loan offer stating the APR. If not, they can seek nullity of the interest clause and repay only the capital.

Finally, for a co-owner, if the co-ownership takes out a loan for works, the managing agent must ensure that the loan offer states the APR. Failing that, the co-ownership could challenge the interest.

Example: if your average overdraft is €5,000 over 3 months with an APR of 15%, the overdraft fees would be approximately €187.50. Without written proof of the APR, you can claim this amount. Accumulated over several years, this could amount to several thousand euros.

Four tips to avoid this type of dispute

• Insist on a written document before signing: do not rely on a verbal agreement for an overdraft. Ask for a credit facility agreement or a loan offer stating the APR, the authorised overdraft amount and the repayment terms.
• Keep all documents carefully: keep the agreement, periodic statements, bank correspondence. In the event of a dispute, these are your best evidence.
• Check the statements: compare the APR shown on your statements with that in the agreement. If it is different, contest it immediately by registered letter with acknowledgement of receipt.
• Do not pay under duress: if the bank demands overdraft fees without having provided you with the prior written document, you can refuse to pay. Consult a lawyer to initiate proceedings.

Further reading: related case law and developments

This 1997 decision is part of a consistent line of the Court of Cassation. As early as 1995 (decision n° 93-18.425), the High Court had ruled that the APR must be stated in a document received by the customer before the conclusion of the contract. More recently, in 2020, the Court recalled that the failure to mention the APR in a mortgage loan offer results in the nullity of the interest clause (Civ. 1re, 10 June 2020, n° 18-26.279).

The trend is therefore clearly protective of the consumer. Courts do not hesitate to penalise banks that fail to comply with formalities. In future, we can expect judges to require even stricter proof, for example the customer's signature on the agreement.

In practice: what to do

FAQ:

1. Can I contest overdraft fees levied 5 years ago? Yes, if you did not receive the prior written document. The limitation period is 5 years from the date the overdraft fees were levied.
2. What if my bank refuses to refund me? Send a formal notice by registered letter. If it remains unanswered, take the case to the High Court (tribunal judiciaire). A specialist lawyer can help you.
3. What costs can I claim in addition to the overdraft fees? You can claim damages for the loss suffered (for example, if you had to take out another credit because of the overdraft fees).
4. Does the decision apply to unauthorised overdrafts? Yes, because the bank charges overdraft fees even in the case of an unauthorised overdraft. The formalities apply from the moment there is a credit facility, even implied.
5. Do I have to prove that I did not receive the document? No, it is for the bank to prove that it gave it to you. It must provide a document signed by you or proof of sending.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) could save you months of proceedings — and often much more. Book an appointment →