Bank Overdraft: Why the New Regulation Will Change (Almost) Nothing

Why It Matters

The new ordinance, stemming from a European directive passed in 2023, aims to eliminate gray areas in short-term credit. Until now, overdrafts and short-term credit facilities of less than three months were exempt from certain requirements: regulated advertising, solvency checks, and clear communication of an Annual Percentage Rate (APR). Now, these products will have to adhere to the same rules as any consumer credit. The Prudential Supervisory and Resolution Authority (ACPR) states that banks will need to assess their clients’ repayment capacity before granting an overdraft. Automatic approvals are a thing of the past: each credit facility will be preceded by a mini credit assessment. However, in practice, this measure will affect few households. As Philippe Crevel, director of the Cercle de l’Épargne, points out, more than half of the overdrafts in France are under €200, a sum considered « negligible » in regards to solvency analysis thresholds. The intention of the regulation is therefore more preventive than restrictive: it aims to hold banks accountable while harmonizing practices across the European Union.

What This Changes (or Doesn’t)

For consumers, the change will be almost imperceptible. Existing overdrafts are not affected; only new authorizations granted after November 20, 2026, will require a formal evaluation. For amounts under €200, banks can continue to follow a simplified procedure. The French Banking Federation (FBF) has expressed skepticism, noting that France already had protective regulations in place, with a cap on overdraft fees, mandatory pre-contractual information, and strictly regulated usury rates. According to them, the CCD2 directive mainly adds paperwork and « unnecessary » operational constraints. In short, banks will have to produce more documents, clients will sign more forms, but the cost of credit and access conditions for overdrafts will remain largely unchanged.

Impact on Bank Mobility

If there is a real impact, it concerns banking mobility: a customer who currently benefits from an old overdraft of €500 without formalities will have little incentive to switch banks to face the new regulations. This bias could hinder competition, acknowledges Philippe Crevel, although he considers the effect to be marginal. For Brussels, the reform primarily fulfills a political goal: harmonizing credit rules among the 27 member countries. For Paris, it allows for demonstrating social commitment in combating over-indebtedness, with cases increasing by 10.8% in 2024, according to the Bank of France. In reality, neither the rates nor commercial practices are expected to be disrupted: overdrafts will remain an expensive form of credit, with effective rates ranging between 18% and 20%, compared to around 10% for standard consumer loans.