Peer-to-peer lending accounts for a growing share of financing options in France. This arrangement, which allows two individuals to enter into a loan without going through a bank, is subject to a specific legal and tax framework.
Since November 2023, the regulatory landscape for matchmaking platforms has changed with the introduction of the European Crowdfunding Service Provider (ECSP) status, changing the rules for anyone considering this type of financing.
ECSP and IFP status: two distinct regimes for peer-to-peer lending
Checking whether a platform is registered is still a useful first step, but it is no longer enough. Since the end of the European transitional period, platforms facilitating interest-bearing loans for commercial projects have been subject to ECSP status, supervised at EU level.
The French regime for crowdfunding intermediaries (IFPs) has not disappeared, however. It covers activities outside the scope of European rules: interest-free loans and non-commercial projects. Anyone considering lending or borrowing through a platform must therefore check that the status displayed matches the activity offered, rather than simply confirming that a registration number exists.
The direct consequence is that an ECSP platform finances projects run by businesses. It does not arrange direct loans between two individuals for personal needs. For person-to-person loans, the legal framework remains that of the French Civil Code and the French General Tax Code, whether or not an intermediary is involved. Exploring P2P lending on Smart PAP reveals this same approach of directly connecting borrowers and lenders, distinct from crowdfunding as defined by regulations.
Peer-to-peer loan agreements: thresholds that trigger requirements
No law requires a written agreement for a small loan. However, if a dispute arises, the burden of proof falls on the parties. For amounts over €1,500, a written document is required to establish that the loan exists. Two forms are accepted: a loan agreement signed by both parties, or an acknowledgment of debt signed by the borrower alone.
A loan agreement offers greater protection. It sets out the amount, term, repayment schedule and, where applicable, interest rate. Having the document registered with a judicial officer gives it a legally established date, making any subsequent debt recovery considerably easier.
Tax reporting for loans over €5,000
Another threshold triggers a tax reporting requirement: any loan over €5,000 must be reported to the tax authorities using Cerfa form 2062. Both parties—the borrower and the lender—are responsible for filing it. Failure to do so does not invalidate the loan, but may lead to a tax reassessment.
Interest received by the lender is taxable as investment income. The agreed interest rate must not exceed the applicable usury rate, or the lender may face criminal penalties.
- Under €1,500: a written document is not legally required, but is strongly recommended to avoid the loan being reclassified as a gift
- Between €1,500 and €5,000: a loan agreement or acknowledgment of debt is required, but no tax return is needed
- Over €5,000: a written document is required, and both parties must file a tax return using Cerfa form 2062
Reclassification as a gift: the tax trap of family loans
This is the most underestimated risk of peer-to-peer lending. A parent who lends money to their child without a written agreement, repayment schedule or record of regular repayments risks having the tax authorities treat the transaction as a disguised gift.
The financial consequences of reclassification can far exceed the original amount. Gift tax then applies, calculated according to the current tax scale. A written agreement with a repayment schedule that is followed is the best protection against this scenario.
For substantial loans, having the agreement drawn up by a notary provides additional security. A notarized deed is enforceable: if the borrower fails to repay, the lender can initiate seizure proceedings directly without first having to obtain a court order.
Peer-to-peer lending platforms and scams: clear warning signs
Peer-to-peer loan scams tend to follow a recurring pattern, often identical from one case to the next.
- A supposed lender contacts the borrower through social media or a forum, offering a very low interest rate and no income requirements
- Before any money is transferred, they demand payment by bank transfer or cash mandate for “application fees,” “insurance fees” or “notary fees”
- Once the fees have been collected, the lender disappears without paying out any money
No legitimate lender asks for fees before releasing the funds. This applies to direct loans as well as loans arranged through platforms. Any request for upfront payment is an unmistakable sign of a scam.
A logo displayed on a website proves nothing. Before taking any steps, checking official registers to verify the platform’s actual status is a basic precaution.
Interest rates and borrower insurance: what the law allows
A peer-to-peer loan can be interest-free or interest-bearing. If an interest rate is agreed, it must not exceed the applicable usury rate. Exceeding it may expose the lender to prosecution for usury.
Unlike the requirements most banks impose for a conventional loan, borrower insurance is not mandatory in this context. This reduces the borrower’s financing costs. In return, the lender alone bears the risk of default if the borrower dies or becomes disabled.
For substantial amounts, taking out life and disability insurance that benefits the lender is a sensible precaution. The cost is generally lower than what a bank would charge, as the parties are free to negotiate the policy.
The flexibility of peer-to-peer loans, both in repayment terms and interest rates, depends on one condition: putting every step in writing. A well-drafted agreement and a tax return filed on time are what separate an amicable arrangement from a costly dispute.
