Rules around bank overdrafts to be tightened in France

Major changes to new French bank accounts are set to take place next year, as the country looks to implement EU directives on account overdrafts and consumer protection.

Overdrafts (découverts) will come under consumer credit regulations (crédit à la consommation) as other loans and forms of credit currently are. 

Currently overdrafts are also considered a form of credit but are subject to different requirements according to the Banque de France. 

The stricter regulations may make obtaining an overdraft more difficult as it will be treated as a loan and therefore subject to more scrutiny.

Several banks in France have previously ranked poorly for high overdraft fees.

The changes are likely to have a greater impact on those seeking larger overdrafts, with accounts having a limit of €200 unlikely to see much difference. 

The change will affect new account holders wanting an overdraft, however those accounts with an overdraft already in place before the changes, scheduled for November 2026, are not expected to be affected.

Overdrafts treated as loans

In order to protect customers from unexpected fees, banks will have to provide clear information about overdrafts, including interest rates and repayment terms (such as daily fees) if their account is overdrawn. 

Bank advisors will need to explain these to customers wanting an overdraft, and the agreement to open one must clearly detail the terms of this.

Banks will need to run checks on clients wanting an overdraft, assessing their ability to pay back any overdraft fees, usually within a month of going overdrawn.

It means fewer customers will receive an automatic overdraft as part of their account, instead needing to make a request to have one and requiring banks to manually approve it.

Effect on lower-income households 

While small overdrafts are less likely to see severe scrutiny, medium and larger overdrafts will require a more stringent checks process before being offered. 

This may affect low-income households, considered more likely to make use of an overdraft to meet cashflow requirements, as they will be limited in the maximum amount they are offered.

In addition, the checks on credit history for opening an overdraft will look at any unpaid or overdue sums, again considered more likely for lower-income households to have struggled with.

If bank advisors use similar methods to assess overdraft limits as they do for loans and mortgages this could see the ‘rule of 30%’ applied, with advisors checking that monthly expenses do not exceed 30% of a person’s monthly net income. 

Applying these rules to overdrafts, someone with €1,000 of expenses would need to be earning almost €5,000 net per month to obtain a €400 overdraft, states financial advice website MoneyVox (expenses plus overdraft total €1,400, just under the €1,500 / 30% limit of net earnings of €5,000). 

Around a quarter of workers in France are thought to earn less than €1,750 net per month, with the net minimum monthly wage for a 35-hour week being €1,426.30.