As mentioned in the second issue of the Update, the issue of recording loans in a register is highly sensitive in France. A tentative draft provision aiming at creating a consumer credit register recording all consumer credits was ruled contrary to the Constitution on the basis that it would disproportionately encroach on privacy rights. As a result, the existing National Register of Household Credit records only debt repayment incidents meeting a number of criteria. Consulting such register for the purposes of assessing borrowers' creditworthiness is mandatory for credit institutions engaging in consumer lending in France. Failure to comply with this requirement results in forfeiture of the creditor's entitlement to contractual interest and automatic entitlement to interest at the statutory rate increased by five percentage points in the vast majority of cases. This five-point margin may paradoxically result in the amounts that the creditor is likely to receive following application of the penalty being actually higher than those that it could have received if it had complied with its contractual obligations. The Court of Justice of the European Union ruled on March 27, 2014 in Case C-565/12 that in such instances, the penalty is not genuinely dissuasive.
In addition, on April 28, 2014, the French Data Protection Authority issued a notice to comply with applicable regulations against a bank for recording in the National Register of Household Credit repayment incidents that do not meet the requirements set out in French law and for maintaining record of repayment incidents beyond the legally prescribed period of time despite repayment of their debt.