The Constitutional Council refused to give reason to the banks by the decision in 2017-685 QPC of January 12, 2018. They seized it to denounce the establishment of the right to the annual cancellation of the insurance borrower. They argued that this type of move would hurt their business and did not respect the contracts that had been signed previously. This decision of the Constitutional Council is a great victory for consumers and we will explain why.
What is annual termination?
To understand the context of this decision, we need to briefly recall the genesis of the right to annual termination.
In the first place, taking out a mortgage insurance is not a legal obligation but may be imposed by the lending institution during a mortgage. In fact, virtually everyone is therefore obliged to take out a mortgage insurance.
Previously, the bank offered you the loan with insurance almost included. The choice for the consumer was therefore limited. In 2008, the UFC-Que Choisir criticized this seizure of banks on loan insurance.
The Lagarde Act of 2010 on borrower insurance introduced the faculty of delegation which allows subscribers to choose their insurer. It was already an important step forward but unfortunately it did not have a real impact.
Then, the Hamon law on borrower insurance adopted on March 17, 2014, strengthened the consumer’s right. In fact, it became possible to terminate his insurance contract during the 12 months following the signature of the loan offer.
Finally, the law Sapin 2 on the cancellation of insurance borrower, also called law Bourquin, opened the possibility of annual change of borrower insurance on each anniversary date of the offer of loan with a notice of 2 months.
This new law on borrower insurance is denounced by the banks. That’s why they tried to repeal the law. The Conseil d’Etat therefore appealed to the Constitutional Council on October 12, 2017. The alleged violation of the constitution concerned Article L. 313-30 of the Consumer Code.
What does the Constitutional Council decision contain?
What the banks accuse the Bourquin Law
Articles L.113-2 of the Insurance Code and Article L.221-10 of the Code of Mutuality are directly targeted by banks. These articles mention a right for the borrower of a loan to terminate his insurance. He may exercise this right after the signing of the contract if he wishes to substitute his insurance with a new insurance.
This termination is possible every year. However, for the latter to be valid, the insured must send a registered letter with acknowledgment of receipt at least two before the due date.
In addition, the Bourquin law of February 21, 2017 gives the right to holders of current contracts on January 1, 2018 to terminate them. In other words, the provision applies to insurance contracts signed before the implementation of the law.
This set of provisions does not please banks at all. In the request to the Constitutional Council, they declare that this right to cancellation affects the economic context. In concrete terms, they fear that this is bad for business.
In support of their argument, they drew attention to the fact that the Sapin 2 law undermines a contractual situation and the benefits expected by the same contract. Therefore, it would be an “infringement of the right to maintain the economy of legally concluded agreements.
In other words, for banks, what is signed is signed. The consumer is committed and the bank can legitimately wait for certain benefits from the contracts concluded.
The response of the Constitutional Council
In the first place, he pointed out that it was possible for the legislator to amend or repeal earlier texts by replacing them with new provisions. If, of course, they respect the constitution.
Secondly, the legislator must not interfere with situations lawfully acquired without a reason of general interest.
According to the Constitutional Council, no provision of the law prior to the law Bourquin could not suggest to the banks that the terms of termination would remain unchanged. Especially since successive modifications have already been made in 2008, 2010 and 2013. All these modifications had already widened the possibilities of termination for the consumers.
The Constitutional Council adds that the fact that banks have created their economic equilibrium over the restriction linked to the termination of insurance and its association with a loan is not enough.
The conclusion of the Constitutional Council
Finally, the Constitutional Council declares that the modification of the article L.313-30 of the code of the consumption “did not affect a situation legally acquired nor questioned the effects which could legitimately be expected of such a situation “. Therefore, the change is in accordance with the constitution.
In addition, the decision of the legislator was taken in favor of the general interest. The measures taken create a better balance between banks, insurers and consumers.
In addition, the right to cancellation applies to contracts in progress simply because it is a commitment over very long periods of time in decades. Then, this new right does not close existing contracts, but simply opens the possibility for the consumer to change insurer.
Especially as for the cancellation is admissible, the new offer must offer equivalent guarantees. Lastly, on contracts that have already been signed, the deadline for implementing the borrower insurance law is dated 1 January 2018, which gives banks time to prepare.
Why this is important to you
The amount of insurance for a home loan can be very high over the years. Therefore, knowing that it is possible to change mortgage insurance insurance is essential. For the consumer, this can represent a significant saving.
Thus, you can play the competition and try to find an offer with equivalent guarantees for a much cheaper price.
Conditions to respect
However, do not forget that if it is possible to change borrower insurance in 2018, you still have to follow certain conditions.
First, the borrower’s insurance change during the 12 months following the signature of the contract is authorized thanks to the Hamon law. Beyond one year, a change is possible on the anniversary date of the loan offer by respecting a notice of 2 months.
Second, for the change to be accepted, the equivalence of the guarantees must be respected. For this, your bank must choose 11 criteria from a list of 18 criteria. This obligation preserves a level of equivalent guarantees. However, having equivalent guarantees does not mean that they must be identical. Feel free to visit our Good to Know page for more information.
Third, you will have to send a cancellation letter for a loan insurance change. In addition, it must include an acknowledgment of receipt to prove your shipment.
Experts can accompany you in your approach and make it easier for you. The algorithm of experts automatically elaborates the offer and the guarantees adapted to the conditions of equivalence expected by your bank. In addition, we take care of all formalities related to the change of insurer.
Our expertise can help you divide by 2 the price of your borrower insurance.