Paragraph 2: Overall effective rate.

The rules relating to the overall effective rate are set out in Articles R. 314-1 to R. 314-14 of the French Consumer Code, which are reproduced below:

"Art. R. 314-1. - The calculation of the overall effective rate is based on the assumption that the credit agreement will remain valid for the agreed term and that the creditor and borrower will fulfil their obligations in accordance with the conditions and within the periods specified in the credit agreement. For credit agreements containing clauses allowing for adjustments to the interest rate and, where applicable, to the charges included in the overall effective rate but which cannot be quantified at the time of calculation, the overall effective rate is calculated on the assumption that the interest rate and other charges will remain fixed in relation to the initial level and will apply until the end of the credit agreement. "

"Art. R. 314-2. - For credit transactions intended to finance the needs of a professional activity or intended for legal entities governed by public law, the overall effective rate is an annual rate, proportional to the period rate, in arrears and expressed per hundred monetary units. The borrower must be expressly informed of the period rate and the duration of the period.

The period rate is calculated actuarially, based on a unit period corresponding to the frequency of payments made by the borrower. Using the compound interest method, it ensures equality between, on the one hand, the sums lent and, on the other hand, all the payments due by the borrower under the loan, in capital, interest and miscellaneous costs, these elements being estimated where appropriate.

Where the frequency of payments is irregular, the unit period is that which corresponds to the smallest interval separating two payments. However, the smallest calculation interval may not be less than one month.

When payments are made at a frequency other than annually, the overall effective rate is obtained by multiplying the period rate by the ratio between the length of the calendar year and that of the unit period. The ratio is calculated, where applicable, to at least one decimal place.

If the credit takes the form of an opening of drawing rights intended to finance the needs of a professional activity, the overall effective rate is calculated on the total of the rights made available to the customer.

Charges relating to guarantees that may be attached to the credit, as well as legal fees, are not included in the overall effective rate defined above, when their amount cannot be precisely indicated prior to the final conclusion of the contract. "

"Art. R. 314-3. - For all credit transactions other than those mentioned in article R. 314-2, the annual percentage rate of charge mentioned in article L. 314-3 is calculated in arrears, expressed per hundred monetary units, using the equivalence method defined by the formula appended to this code. The borrower must be expressly informed of the duration of the period.

The annual percentage rate of charge is calculated actuarially and, using the compound interest method, ensures equality between, on the one hand, the sums lent and, on the other hand, all payments due by the borrower under this loan for repayment of the capital and payment of the total cost of the credit within the meaning of 7° of article L. 311-1, these elements being estimated where applicable.

For credit agreements for which a fixed borrowing rate has been agreed for the initial period of at least five years, at the end of which the borrowing rate is negotiated in order to agree a new fixed rate for a new period, the calculation of the additional illustrative annual percentage rate of charge included in the European standardised information sheet referred to in Article L. 313-7 covers only the initial fixed-rate period and is based on the assumption that, at the end of the fixed-rate borrowing period, the remaining capital is repaid. "

"Art. R. 313-4. - Are included in the annual percentage rate of charge for the loan, where they are necessary to obtain the credit or to obtain it on the terms stated, in particular:

1° Application fees ;

2° Fees paid or due to intermediaries involved in any way whatsoever in granting the loan, even if these fees, commissions or remuneration correspond to actual disbursements;

3° Costs of insurance and compulsory guarantees;

4° The cost of opening and maintaining a given account, the cost of using a means of payment that allows both transactions and direct debits to be made from the account, and other costs relating to payment transactions;

5° The cost of valuing the property, excluding registration fees relating to the transfer of ownership of the property. "

"Art. R. 313-5. - The annual percentage rate of charge does not include:

1° Costs relating to the acquisition of the properties referred to in a of 1° of Article L. 313-1, such as related taxes, notarial deed fees drawn up in application of Section 3 of Chapter I of Title IV bis of Book IV of the Arrêtés section of the French Commercial Code ;

2° Costs payable by the borrower in the event of non-compliance with any of its obligations under the credit agreement.
Additional assumptions for calculating the annual percentage rate of charge are set out in the appendix to this code. "

"Art R. 314-6. - In the case of an advance made under a factoring contract, the overall effective rate is an annual rate, proportional to the period rate and expressed per hundred monetary units.

The amount of the advance to be taken into account for calculating the overall effective rate is related, using the numbers method, to a period of one day.

This rate is calculated in accordance with the formula set out in the appendix to this code. "

"Art. 314-7. - For an overdraft facility or an overdraft authorisation, where the annual percentage rate of charge is calculated before the facility or authorisation is used, the calculation is made using the method defined by the formula set out in the appendix to this code and referred to in article R. 314-3.

After an overdraft authorisation, overdraft facility or overdraft has been used, the annual percentage rate of charge is calculated by relating the amount of credit to be taken into consideration, using the number method defined by B of the appendix to decree no. 2002-928 of 10 June 2002 issued in application of article 1 of decree no. 2002-927 of 10 June 2002, to a period of one day at the end of which it is deemed to have been repaid together with the related agios. For this purpose, each of the debit balances successively entered in the account during the interval between two contractual closures is multiplied by its own duration in days.

For overdrafts intended to finance the needs of a professional activity, the overall effective rate is calculated by relating the amount of credit to be taken into consideration, according to the number method mentioned in the second paragraph, to a period of one day at the end of which it is deemed to have been repaid at the same time as the related agios. To this end, each of the debit balances successively entered in the account during the interval between two contractual closures is multiplied by its own duration in days. "

"Art. R. 314-8. - In the case of a discounting transaction, the period rate is the ratio between the interest and miscellaneous charges payable by the borrower in respect of the discount and the amount of the discounted bill. The period is equal to the number of calendar days from the date of negotiation up to and including the actual maturity date of the bill; this period cannot be less than ten days. "

"Art. R. 314-9. - When the amount of the transactions referred to in articles R. 314-7 and R. 314-8 is less than an amount set by order of the Minister for the Economy and Finance, a flat-rate minimum may be charged for each transaction, which is not taken into account when determining the overall effective rate; the borrower must be informed of this minimum. "

"Art. R.314-10. - When the granting of a loan is subject to a prior savings phase, the overall effective rate is calculated without taking this savings phase into account. "

"Art. R. 314-11. - The annual effective rate for the insurance mentioned in article L. 312-7 is equal to the difference between :

1° the annual percentage rate of charge defined in article L. 314-1, calculated in accordance with articles R. 314-1 to R. 314-10 on the assumption that the insurance offered for the purpose of repaying the credit is fully required by the lender, and ;

2° The annual percentage rate of charge defined in article L. 314-1, calculated in accordance with articles R. 314-1 to R. 314-10 on the assumption that no insurance is required by the creditor.

For the purposes of calculating the annual effective rate of insurance, the method used is the same as that used to calculate the annual effective rate, i.e. either the discounted cash flow method, or the compound interest method by capitalising the periodic rate over a period of one year. "

"Art. R. 314-12. - The annual effective insurance rate referred to in article L. 313-8 is equal to the difference between :

1° the annual percentage rate of charge defined in article L. 314-1, calculated in accordance with articles R. 314-1 to R. 314-10 on the assumption that the insurance proposed for the purpose of repaying the credit is fully required by the lender, and ;

2° The annual percentage rate of charge defined in article L. 314-1, calculated in accordance with articles R. 314-1 to R. 314-10 on the assumption that no insurance is required by the creditor.

For the purposes of calculating the annual effective rate of insurance, the method used is the same as that used to calculate the annual effective rate, i.e. either the discounted cash flow method, or the compound interest method by capitalising the periodic rate over a period of one year. "

"Art. 314-13. - The annual percentage rate of charge for the insurance is accompanied by details of the cover for which it includes the cost. "

"Art. 314-14. - The effective annual rate of insurance is not mentioned for hire-purchase and hire-purchase transactions. "