Dispute with your bank: what remedies for individuals and businesses?

A disputed direct debit that is never refunded, bank charges that build up without explanation, a mortgage containing terms that were never read, a guarantor called upon for a disproportionate sum, or a business whose bank abruptly withdraws its overdraft facility: banking disputes affect the holder of a current account and the manager of a small business alike. Faced with an institution backed by powerful legal departments, the imbalance seems overwhelming. Yet French law strictly regulates the relationship between a bank and its customers, and offers concrete remedies. This guide distinguishes the two main families of dispute: for individuals, unfair terms (clauses abusives) and personal guarantees (cautionnement); for businesses, the wrongful termination of credit facilities.

Two logics of banking litigation that should not be confused

Banking disputes are not governed by the same rules depending on whether the customer is an individual (a consumer) or a business (a professional).

The individual benefits from consumer law, which is highly protective. He or she may rely on the regime governing unfair terms, on the formal requirements applying to personal guarantees, or on the bank's duty to warn (devoir de mise en garde) before a loan is taken out. The court's reasoning starts from a premise: the consumer is the weaker party, and the balance must be restored.

The business, by contrast, falls within a commercial logic. It cannot rely on consumer law where the credit serves its professional activity. Its preferred ground for litigation is the ongoing financing relationship: overdraft facility, discounting line, factoring, business loan. The central issue then becomes the termination of banking facilities.

Understanding this dividing line determines the entire strategy. A manager who has personally guaranteed the debts of his or her company sits astride both regimes, which explains the richness of the case law on guarantees given by company managers. The fate of that commitment where the company is subject to collective proceedings is detailed in our article on the personal guarantee given by a company manager.

The amicable stage: written complaint and banking mediation

Before going to court, an amicable stage is almost always necessary, and it is often neglected.

The first step is to send a written complaint to the customer service department, then to the institution's complaints department. This letter, preferably sent by registered post with acknowledgement of receipt, should set out the facts, the dispute and the precise request (refund, cancellation of charges, return of sums). It starts the clock on the bank's time limits for replying and constitutes dated evidence, useful later before the court.

If the reply is unsatisfactory or delayed, the customer may refer the matter free of charge to the banking ombudsman (médiateur bancaire). Each institution must appoint an ombudsman, whose contact details appear on account statements and account agreements. Mediation leads to a non-binding opinion, which the bank often follows. It interrupts the limitation period and does not prevent court proceedings afterwards.

For a business facing a reduction in its facilities, a specific scheme exists: Corporate Credit Mediation (Médiation du crédit aux entreprises), run by the Banque de France. It steps in where an institution refuses or reduces financing, and can sometimes restore dialogue before a court confrontation. Instructing a lawyer in banking litigation at this stage makes it possible to structure the case and avoid premature concessions.

Remedies for individuals: unfair terms

What the law characterises as an unfair term

The regime governing unfair terms is the individual's main weapon in a dispute with a bank. Article L212-1 of the French Consumer Code sets out the principle: in contracts concluded between a professional and a consumer, terms are unfair where they create a significant imbalance between the rights and obligations of the parties to the detriment of the consumer.

In contracts concluded between professionals and consumers, terms are unfair where their object or effect is to create, to the detriment of the consumer, a significant imbalance between the rights and obligations of the parties to the contract. (Article L212-1 of the French Consumer Code)

This text transposes European Directive 93/13/EEC of 5 April 1993, which explains why the Court of Justice of the European Union directly influences French case law on the subject.

Terms frequently challenged

In account agreements and loan contracts, several provisions are regularly disputed: terms allowing the bank to change pricing conditions unilaterally without real notice, acceleration clauses (déchéance du terme) drafted too broadly, allowing immediate repayment to be demanded for a minor incident, and certain terms relating to unauthorised overdraft fees and intervention commissions.

The court has a significant power: it may raise of its own motion the unfair nature of a term, even if the consumer has not relied on it. A term held to be unfair is deemed unwritten, that is, removed from the contract, which otherwise remains in force if it can operate without it. On the interaction between limitation and set-off in disputes over unfair terms in a mortgage, see our analysis of mortgages and unfair terms.

Take a borrower who, after paying two monthly instalments a few days late, is asked by the bank for the whole of the outstanding principal on the basis of an automatic acceleration clause. The court may examine whether this clause, applied to a minor default, creates a significant imbalance, and may set it aside.

Remedies for individuals: guarantee disputes

The disproportion of the commitment

The personal guarantee is one of the liveliest areas of banking litigation, particularly for managers and their relatives who guarantee a business or property loan.

Ordinance No. 2021-1192 of 15 September 2021, reforming the law of security interests, rewrote the regime governing personal guarantees. For guarantees entered into since 1 January 2022, the proportionality rule now appears in Article 2300 of the French Civil Code: a professional creditor may not rely on a guarantee given by an individual whose commitment was, when it was entered into, manifestly disproportionate to his or her income and assets, unless the guarantor's financial position has improved by the time the guarantee is called. Disputes arising from this rule between the bank and the guarantor are dealt with separately in our article on the manifestly disproportionate guarantee.

For earlier commitments, former Article L332-1 of the Consumer Code (previously L341-4) applies, with a more radical sanction: disproportion simply deprived the bank of the right to rely on the guarantee. The date on which the instrument was signed therefore determines the applicable regime, which calls for a precise chronological analysis of the file.

The protective formalities

A personal guarantee is subject to strict formal requirements. A guarantor who is an individual must add a handwritten statement (or its equivalent since the reform) expressing, in full knowledge of the position, the nature and extent of the commitment. A statement that is incomplete, inaccurate or inconsistent with the body of the instrument may render the guarantee void. This technical ground gives rise to many annulments, because banks standardise their documents and sometimes neglect the rigour required.

The duty to warn an unsophisticated guarantor

Case law imposes on the bank a duty to warn (devoir de mise en garde) an unsophisticated guarantor where there is a risk of excessive indebtedness arising from the commitment being unsuited to the guarantor's financial capacity. Breach of this duty does not annul the guarantee but gives rise to damages, often set off against the debt, which reduces the sum claimed accordingly.

Consider the spouse of a craftsman who guarantees a business loan without significant income of his or her own. If the bank has not checked that this commitment is consistent with his or her situation, the guarantor has several cumulative arguments: disproportion, failure to warn, and sometimes a formal defect in the handwritten statement.

Remedies for businesses: wrongful termination of credit facilities

The statutory notice framework

On the business side, the emblematic dispute remains the wrongful termination of business credit. A company often relies on permanent banking facilities: overdraft facility, discounting of bills of exchange, cash facility, factoring. The abrupt withdrawal of these facilities can push a healthy business towards insolvency (cessation des paiements).

Article L313-12 of the French Monetary and Financial Code governs such termination. Any facility of indefinite duration, other than an occasional one, that a credit institution grants to a business may be reduced or terminated only on written notification and on expiry of a notice period fixed when the facility was granted. Save in exceptional cases, that notice period may not be less than sixty days.

Any facility of indefinite duration, other than an occasional one, that a credit institution (...) grants to a business may be reduced or terminated only on written notification and on expiry of a notice period fixed when the facility was granted. On pain of nullity of the termination of the facility, that period may not be less than sixty days. (Article L313-12 of the French Monetary and Financial Code)

An institution that withdraws a facility without written notification, or without observing the agreed notice, incurs liability. The bank is not, however, required to give reasons for its decision to end the facility; it must only comply with the form and the time limit.

Exceptions to the notice requirement

Notice is not due in two cases provided for by the same article: where the borrower has behaved in a seriously reprehensible manner, or where the borrower's situation proves to be irremediably compromised. These exceptions are interpreted strictly. Tight cash flow or a few payment incidents are not enough to establish an irremediably compromised situation: recovery must have become manifestly impossible. It is often on this ground that the case turns, with the bank relying on the exception to justify immediate termination and the business showing that its position remained viable.

Compensation for the loss suffered

Where the termination is held to be wrongful, the business may obtain compensation for the loss suffered: the cost of more expensive replacement financing, loss of markets, damage to its commercial reputation, and even an increase in liabilities if the termination contributed to the failure. The causal link between the termination and the loss must be established precisely, which requires reconstructing the chronology and quantifying the consequences.

Wrongful continued financing (soutien abusif), conversely, penalises a bank that artificially maintains credit to a business whose situation it knows to be desperate, increasing the liabilities to the detriment of the other creditors. Wrongful termination and wrongful continued financing thus mark the two limits of a lender's liability.

The duty of advice, warning and information

Beyond these specific disputes, the bank is subject to general obligations, the breach of which underpins many claims.

The duty of information relates to the characteristics of the product or credit: rate, total cost, guarantees required. The duty to warn, established by case law, requires the bank to alert an unsophisticated borrower to the risk of excessive indebtedness arising from the credit granted, having regard to his or her repayment capacity. In principle it applies only to a lay borrower, not to a sophisticated customer with the skills to assess the transaction personally.

The distinction between a sophisticated and an unsophisticated customer is decisive and is assessed case by case. An experienced manager familiar with financial structures will generally be regarded as sophisticated; an individual taking out a first mortgage is not. The burden of proving compliance with these obligations rests on the bank, which is a notable procedural advantage for the customer.

Taking legal action: court, limitation and evidence

Which court

The choice of court depends on the nature of the dispute and the parties. A dispute between an individual and his or her bank falls within the jurisdiction of the judicial court (tribunal judiciaire). A commercial dispute involving a business falls, depending on the case, within the jurisdiction of the commercial court (tribunal de commerce). Representation by a lawyer is mandatory before the judicial court above a certain claim threshold, and strongly recommended in any event given the technical nature of the subject.

Limitation periods

Limitation is a major point of vigilance. A claim by a professional against a consumer, such as the bank's claim for payment, is in principle time-barred after two years for goods and services supplied to consumers (Article L218-2 of the French Consumer Code). Personal and moveable claims are time-barred after five years from the day on which the right-holder knew or should have known the facts enabling him or her to act (Article 2224 of the French Civil Code). The variable starting point of this period fuels substantial litigation, in particular for claims based on the effective global rate (taux effectif global) or on breach of the duty to warn.

The question of evidence

Banking litigation is evidence-driven litigation. Account statements, signed agreements, amortisation tables, correspondence, notice of termination: the reconstruction of the documents determines the outcome of the case. The customer has a right of access to his or her data and may request disclosure of documents. Keeping all documents methodically from the start of the relationship remains the best protection.

Conclusion: anticipate rather than endure

The apparent imbalance between the bank and its customer is not a legal inevitability. The individual has a protective arsenal built around unfair terms, the formal requirements and proportionality of personal guarantees, and the duty to warn. The business, for its part, finds in Article L313-12 of the French Monetary and Financial Code solid protection against the abrupt cutting of its financing. In both cases, success depends less on the strength of the arguments than on the rigour of the preparation: a precise chronology, preserved documents, a documented amicable stage.

The real advice of substance is this: do not wait for the summons or the third-party claim before reacting. At the first signal (a term that surprises you, a letter announcing the reduction of an overdraft, a guarantee you are asked to sign without explanation), have the file analysed by a lawyer in banking litigation. A notice of termination challenged within days of being notified, or a guarantee examined before it is signed, can be defended far better than a dispute that comes to light months later.

Frequently asked questions

How can I challenge unfair bank charges taken from my account?

First send a written complaint to the bank's customer service department, by registered post with acknowledgement of receipt, detailing the disputed debits. If there is no satisfactory reply, refer the matter free of charge to the banking ombudsman, whose contact details appear on your statements. Certain intervention commissions and pricing terms may be challenged on the basis of the unfair terms rules of Article L212-1 of the French Consumer Code. Keep all your statements, which are evidence of the sums claimed.

Can a bank withdraw my business's overdraft facility overnight?

No, subject to exceptions. Article L313-12 of the French Monetary and Financial Code requires written notification and notice of at least sixty days to reduce or terminate a non-occasional facility of indefinite duration. The bank may dispense with this notice only in the event of seriously reprehensible conduct by the business or an irremediably compromised situation, both strictly interpreted. A termination without notice or written notification gives rise to compensation for the loss suffered.

Can a disproportionate guarantee be annulled?

The commitment of a guarantor who is an individual that is manifestly disproportionate to his or her income and assets may be neutralised. For guarantees entered into since 1 January 2022, Article 2300 of the French Civil Code deprives the bank of the right to rely on it to the extent of the disproportion, unless the guarantor's financial position has improved. For earlier commitments, former Article L332-1 of the Consumer Code resulted in a full discharge of the guarantor. The date on which the instrument was signed determines the applicable regime.

What is the bank's duty to warn?

It is the obligation, established by case law, to alert an unsophisticated borrower or guarantor to the risk of excessive indebtedness arising from the credit, having regard to his or her financial capacity. It benefits only the lay customer, not a sophisticated customer with the skills to assess the transaction. Its breach does not annul the contract but gives rise to damages that reduce the debt. The burden of proving compliance with this duty rests on the bank.

Is it compulsory to attempt mediation before suing a bank?

Referral to the banking ombudsman is not always a legal precondition to proceedings, but it is strongly advisable. It is free, interrupts the limitation period and often leads to a solution that the institution follows. For a business whose facilities are under threat, the Banque de France's Corporate Credit Mediation offers a specific route. If it fails, the court route remains open and the amicable step does not cause any loss of rights.

What is the time limit for taking action against a bank?

Personal claims are in principle time-barred after five years from the day on which the right-holder knew or should have known the facts enabling him or her to act (Article 2224 of the French Civil Code). Certain claims under consumer law are subject to a two-year period (Article L218-2 of the French Consumer Code). The starting point, often debated, depends on the date on which the breach was discovered. A prompt consultation makes it possible to secure these time limits before any claim becomes time-barred.

Is a manager who guaranteed his or her company's debts a sophisticated customer?

Not necessarily. Being a manager is not in itself enough to establish that a guarantor is sophisticated; the courts assess the person's experience and financial skills in practice. A manager familiar with financial structures will generally be regarded as sophisticated, whereas a novice manager may remain a lay person. This characterisation determines whether the duty to warn exists and warrants a careful examination of the signatory's profile.