Bank overdraft authorization
Verified 01 July 2019 - Directorate for Legal and Administrative Information (Prime Minister)
An overdraft is a negative balance on your account, that is, transactions recorded as debit are greater than transactions recorded as credit to your account. You can arrange with your bank an overdraft authorization. In exchange for the overdraft, you will pay interest (agios). If the overdraft is exceeded, the bank may charge bank fees and commissions, the amount of which is capped. The authorization may be reviewed or canceled.
An overdraft is a negative balance (or "debtor") of the bank account. The bank may continue to operate the account by agreeing to debit the account (e.g.: take a levy) when the provision is not sufficient.
It can be a simple tolerance, when the bank does so exceptionally and without prior agreement. In this case, it is usually a small overdraft for a limited period of time.
You can also provide with the bank an overdraft authorization:
- or account agreement,
- subsequently by signing an exceptional authorization.
You can apply for an exceptional authorization in an agency or by sending a letter to your bank.
Ceiling and duration
The ceiling and the duration of the overdraft shall be provided for in account agreement or in the exceptional authorization.
The overdraft may not exceed 3 consecutive months.
Beyond that, the bank must give you a pre-offer of credit, valid for 30 days.
The bank must indicate on each monthly statement of account the limit of the overdraft authorization from which the client benefits.
The overdraft involves the billing by the bank of interest debtors, called agios..
the account agreement may provide for an exemption from agios for occasional overdrafts of a limited amount.
There are 2 types of agios: flat-rate and proportional agios.
Most banks charge a minimum lump sum for any overdraft situation, regardless of its amount and duration.
Proportional shares are calculated based on the duration and average amount of overdraft use reported at an interest rate: the annual percentage rate of charge (APR)..
The APR must be less than wear rate ..
The calculation of the agios is done day by day.
Agios = overdraft amount * number of days * APR / 365
For example: You owe €950 during 15 days at the APR 18%..
The amount of agios for this period is: 950 * 15 * 18 / 100 / 365 = €7.027 €
Counting and payment of agios are usually quarterly.
The bank must indicate on each monthly statement of account the annual percentage rate of charge (APR) applied.
The total amount of the shares taken must be shown in annual fee summary published by the bank in january.
Exceeding the authorized overdraft incurs additional costs.
You will have to pay:
- agios at the rate set for authorized overdraft
- and agios at an increased rate for the authorized overrun.
The increased rate is communicated to you before any authorized overdraft transaction record.
Like all APRs, it must be less than wear rate ..
You may also be charged a fee for forcing and other intervention fees. They are different if you have taken out an offer with essential banking services at a price cap, intended for customers in a situation of financial fragility.
the persons recognized as over indebted are considered to be in a fragile financial situation.
Maximum charge per operation: €8
Maximum fee per month: €80
You are a client in a situation of financial fragility
You benefit from a specific "fragile customer" offer
- Maximum charge per operation: €4
- Maximum fee per month: €20
since 1to in july 2019, banks committed to cap bank incident fees at €20 by month €200 per year.
You don't get it
From 1to in february 2019, banks committed to cap bank incident fees at €25 per month.
You may also
Overdraft authorization may be revised downwards or upwards.
You can request a review of the overdraft at any time by mail to your bank.
If the bank lowers the overdraft limit or duration on its own initiative, it must however comply with the conditions laid down in the account agreement or the exceptional overdraft authorization.
If you feel the review is abusive, you can:
You can ask your bank to cancel the overdraft authorization at any time.
If the bank terminates the overdraft authorization on its own initiative, it must however comply with the conditions laid down in the account agreement or the exceptional overdraft authorization.
If you feel that the termination is abusive, you can enter:
- Consumer Code: Articles L121-12 to L121-14Right of banks to charge fees
- Consumer Code: Articles L314-1 to L314-5Determination of the overall effective rate
- Consumer Code: Articles R314-1 to R314-14Calculation of the overall effective rate (Article R314-7)
- Decree No. 2002-928 of 10 June 2002 on the calculation of the overall effective rate for consumer creditExamples of Calculating Overdraft Teg
- Monetary and financial code: Articles L312-1-1 to L312-1-8Limitation of fees (Rule L312-1-3)
- Monetary and financial code: Articles R312-1 to R312-4-4Maximum overrun charge allowed