On social networks, complaints are ringing: while the State and the banks have been committed for two years to the massive deployment of State-guaranteed loans (PGE), the twittos @MisterComptable (2,700 subscribers) wonders: “Question stupid: why on a PGE is there a borrower’s insurance, if it is guaranteed by the State?” The account of @dtolstoi is no less surprised: “The PGE is guaranteed by the State (redundancy) and the banks always take death and disability insurance from it.” As for @ sdtoi3, he also points out that it is necessary to add to the interest rate a “personal insurance of the business manager” to know the overall price of this loan. So many false notes in the hitherto well-orchestrated concert of the distribution of PGEs by the banks, which are 90% guaranteed by the State.
Read alsoThe PGE should cost the State less than expected
Lack of transparency
It is difficult to know the proportion among the nearly 700,000 PGEs distributed to cushion the economic shock of the pandemic, but many bank branches have strongly encouraged their professional customers to take out borrower insurance in order to cover the risks of death and invalidity of key executives in the event of a “glitch”, according to the expression used in insurance. Transactions that sometimes lacked transparency. Julien, manager of a small computer hardware company, was thus able to obtain a PGE of 80,000 euros from LCL in January 2021. “In the urgency of the situation, I did not look at all the clauses, explains the chief company. Gross error!” A year later, he signs a postponement of the repayment of his loan and receives a new payment schedule. “I discovered that it included insurance for an additional total amount of just under 2,000 euros,” the manager is surprised. When questioned, his banker explains to him that this has been linked to the contract since the origin of the loan. And that each request for deferred payment lengthens the duration of the insurance contribution by the same amount.
State Focus
However, the State has never demanded such assurances. In the trial and error that followed the implementation of the PGE system, the Ministry of the Economy contented itself with pointing out that banks were prohibited from taking out additional guarantees on loans – but specifying that an insurance -death was not considered as such. Since then, the document detailing the operation of the PGE has been updated with more precise wording: “It is accepted that the professional or the manager may request or be offered, but not required, to take out death insurance.” The French Banking Federation, contacted, recalls the non-binding nature of this proposal.
Read alsoBillionaire Sanjeev Gupta’s conglomerate under investigation in Paris after the disappearance of a PGE
The director of the CIC who received Alice, however, left her little choice to obtain, in August 2020, a loan of 300,000 euros – a breath of fresh air for the family business she runs, in fashion and catering. According to his adviser, the signing of a death insurance contract was a sine qua non for the release of funds. In addition to the additional cost of 5,000 euros, the arrangement of the insurance then displeases the young woman. The company is being taken over by three children of the founding family (including Alice, aged 30), but the bank wanted to put the insurance on the almost seventy-year-old father, who is nevertheless the non-operational president of the company. ‘company. The branch manager assured, according to Alice, that this insurance obligation was part of a group directive. But a senior manager of Crédit Mutuel, of which CIC is a subsidiary, says he does not know of the existence of this instruction. “Some mistakes may have been made”, in the disorganization linked to the Covid, he considers. It also takes care to defend the principle of such borrower insurance in specific cases. “The State counted on us so that we continue our banking profession”, that is to say by playing the filters to select the files and define the amounts granted. “When the company depends on a key man, whose disappearance would cause the business to collapse, it is not illegitimate to suggest such insurance, believes the manager. This process is healthy both for the bank, which takes still 10% of the risk of the PGE, only for the State.”
Protections not acquired
Indeed, in the event of default by the borrower, reimbursements can be requested from the insurer, avoiding the public authorities having to take out their checkbook. Frédéric Abitbol, President of the National Council of Judicial Administrators and Judicial Agents supports this reasoning: “That banks require coverage seems quite reassuring to me, as a citizen and taxpayer.”
It is still necessary that the insurance actually take over in case of difficulty. André, who manages a company specializing in design with his brother, did not manage to trigger the protections he thought he had acquired. “When Société Générale imposed this borrower insurance on us, my brother and I did not skimp, he recalls. In view of the amount of the loan granted, 150,000 euros, we agreed to pay 20 euros per month contribution.” He even thought he would benefit from this coverage when, a few months later, an autoimmune disease was detected in his brother, who could no longer take care of the business. André decides to take out insurance to pay for his brother’s share of the PGE reimbursement. But after a long battle, adding to the difficulties of running the business alone, André is finally dismissed. Société Générale only offers to reimburse the few hundred euros of contributions already paid. Warned of these situations, a senior official of France Assureurs, employers’ federation of the sector, squeaks: “It is the bank insurers who want to make fat.” At a time when, however, the banks were reaping monumental profits. And at the risk of tarnishing the great success met by the PGE with companies.
Bank insurers at the limit of legality
Certain methods used by banking agencies on PGEs reflect a broader trend in the sector. To garner more margins in a macroeconomic context of low interest rates which have eroded their income, bank insurers (Crédit Agricole, BNP Paribas, Société Générale, Crédit Mutuel, etc.) have in recent years encouraged their agents to sell insurance products “house” – more lucrative than the interest rates generated by loans – to accompany their banking offer. Many agencies thus exert pressure when granting a loan, in particular for a real estate acquisition, so that their clients take out the bank’s borrower insurance. The request borders on illegality: the Lagarde law (2010) allows consumers to take out the borrower insurance of their choice and a banking establishment cannot legally refuse to grant credit if the guarantee is chosen elsewhere. But, often, explains a real estate broker, the bank puts pressure – orally – to condition the credit on the purchase of insurance.