March 2014
« A Horse with No Name » is a song written and first recorded by the British band America. It was released in early 1972.
The lyrics are very poetic and describe an epic journey in a desert. This line is repeated numerous times through out the song: In the desert you can to remember your name
I associate dealing with the French administration and numerous other large French corporations with being confronted with the desert. This comes from the sense of dryness, the absence of human connection, the frightening feeling of dealing with an organization of gigantic size that moves with a lot of power.
Almost all the topics this month are related to this aspect of French life. There are objective reasons why the initial contact is so cold and distant, why the service rendered feels so overwhelmingly anonymous.
At the same time, we have all at least once experienced unexpected relief at the moment when a civil servant steps out of his glacial attitude and becomes really helpful, showing care and concern, becoming surprisingly eager to fix the problem, to find the solution, even asking his colleagues, who are also happy to get involved. These people are now functioning under the “French grey area rule” – strict compliance with the regulations is temporarily not applicable.
France, as a nation runs on grey, which is very scary for foreigners who can only feel safe when they know that they are obeying the law. France needs a minimum of informal flexibility and, currently, this can only come with a “grey” approach.
Mastering the art of living safely in the grey area is an essential skill to acquire in order to enjoy the beauties associated with a certain « joie de vivre » in France, and, therefore, with the French way of life.
Until then, foreigners often find themselves obliged to listen very carefully, while waiting anxiously to be called, hoping to remember how the French pronounce their names or the numbers they are holding as they wait for their appointments.
My last issue spurred a lot of vehement reactions of very different kinds badmouthing the French banking system, standing with the French against the French bashing that Americans often do, and so on. I chose one negative and one positive to illustrate this as well as to show how misconceptions can be hurtful.
READER AS COMMENT ON FRENCH BANKS
“I always enjoy your explanations of French ways that so mystify the Anglophone. This time, however, you’ve done your countrymen a great disservice.
“In justifying the way this man’s bank handled his rental security deposit, you state that a caution through a bank is simply a lien on an asset. So far, so good. Next, you say the bank charges a fee for providing this service. Fine. But that is where it all falls apart.
“Fees should be clearly spelled out in any documentation. And, a lien is simply a legal document that requires no ongoing management. Presumably, then, the fee for a bank to handle a caution should be a nominal, one-time charge. Whatever the fee was, it should have been made clear at the outset and there should have been no surprise at the back end.
“You rationalize what happened to this tenant by saying expressly that as far as the bank was concerned,; everybody knows how the system really works so they didn’t need to tell him. On that basis we can rationalize all manner of mischief, can’t we? Anyway, this man was obviously a foreigner. If his language skills weren’t a dead giveaway, how about the fact that he needed the bank to handle his caution in the first place? A bank is a highly sophisticated institution. Caveat emptor doesn’t wash here.
“Perhaps if you are French and understand how French banks really work then you are better equipped to deal with this sort of situation … although as you point out it’s a situation a French person by definition would never encounter. But you are far more sophisticated than the average French person. Dollars to donuts (as we Americans say), the average French person would have no idea the money they understood to be safely on deposit was actually being placed in a CD or money market fund at risk of personal loss to them.
“The facts presented by this man are that he requested no investment, and that the contract specified no investment. You are arguing that the contract didn’t really mean what it said because, well, this is France and everybody here knows that things work differently. Is that the message you really wanted to convey?”
MY RESPONSE
The origin of this painful situation was that this foreigner did indeed sign documents that he/she did not understand. This is a bad thing to do and everybody knows it. However, almost daily we engage in contractual agreements that we have not read, and therefore we operate on pure assumption. Most of the time, this does not create serious problems because the odds are that nothing bad will happen and the normal line of action is simple, not to say basic. Think of going to the grocery store and walking out after having paid for what you wanted to buy: in 90% of cases this is all you need to know. The same thing can be said about, using public transportation, ATM machines, phones, etc. The truth is that we all live in societies where business agreements are neither negotiated nor signed. The few times there is a real need for signature, the common thing done by huge corporations is to give you a form to sign with clauses on the back in small print that are virtually impossible to grasp even by an average native speaker. A foreigner in such a case is totally trapped unless someone goes over the clauses and explains them. The professional should do this in order to be fair, but how often is this done?
Therefore, I can easily see how this client of the bank signed, trusting the professional working there, without checking anything for him or herself.
Now, the most fundamental jobs of a bank are to safeguard the money clients deposit in their accounts, and to lend money to clients who need it. The loan can be secured or unsecured. This is banking 101. Ever since the first bank was created, this is what the banking industry has done. A bank guaranty is nothing more than a promise to pay money in certain circumstances, the promise being secured by a lien, on the car, or on a portfolio, or a mortgage, which is the specific one for real estate. The bank guaranty is a mechanism very close to a loan. There is nothing complicated here for a bank. The client may be confused because this is not commonly done for individuals. The best way I can explain this is by using the comparison with buying a car with borrowed money. As long as you pay, you keep the car. Should you stop paying the loan, the car is repossessed. That is what a secured loan is.
I am really not sure that the client had a problem with this set-up as such. He/she understood the lien and the need to leave money in the bank. I believe that what he/she did not understand was that the bank charged a fee every year, a tiny percentage of the amount of the guaranty, and that the money would not be in a traditional savings account but invested in a mutual fund, called a SICAV in French.
To specifically address your question:
The facts presented by this man are that he requested no investment, and that the contract specified no investment. You are arguing that the contract didn’t really mean what it said because, well, this is France and everybody here knows that things work differently. Is that the message you really wanted to convey?
What I am saying is that a bank in France offers a range of services that Americans are not used to, even though the evolution in the USA is going in that direction. This means that at your local branch in France, the client has access to all basic banking services, and can also trade on any market, give instructions to the portfolio manager, invest in mutual funds, invest in annuities, and buy homeowner, health and car insurance policies. Most foreigners do not expect such a large range of services to be available at a local branch. Furthermore, in our case, the client never gave written instructions not to invest money, and I am sure that the bank had given this client all the documents needed to set everything up and that all the information was there, provided the client had the ability and the time to read all the fine print.
So yes, it is very clear that, for numerous things, things are done differently in France, just as in most countries.
The message I wanted to convey when choosing this topic was that getting all the information is critical for foreigners living in France, or any other foreign country, for that matter. Making assumptions in a foreign country is an extremely dangerous thing to do. This sad situation would have never happened if the client, before signing, had asked all the questions needed to understand the mechanics and the steps that a bank takes to implement a bank guaranty in France.
SECOND READER IS COMMENT REGARDING PARDON MY FRENCH
Thanks as always for your great column. I read this one with great interest because I often hear this expression in the USA. This drives me crazy because it perpetuates an unfair stereotype of the French. My husband and I purchased a home in Menton two years ago and plan to retire here just under 6 months every year. The rest of the time we live in Florida. We have found our experiences with the French to be wonderful. From visiting our bank, to working with our real estate agent, to renovating our apartment while still living 5000 miles away in the USA, we have had great experiences. Sure, once in a while we encounter a rude person, but that certainly happens in the US as well. It is the exception rather than the rule.
For the past several years, whenever someone says pardon my French to me, I stop them in their tracks by simply saying, I did not know you spoke French and then I start speaking to them in French. It really makes them think twice about what they are saying. Sometimes folks just do this out of habit, other times out of ignorance. Either way, it is wrong and I hope someday this will stop. After all, imagine if people said, Pardon my English prior to using an expletive – Americans and Brits would be up in arms!
Keep up the great work on your column! And no, you have nothing to apologize for in being French. The French are magnifique!
Best regards,
ANSWER
Your question raises a much bigger issue: foreigners always find it odd, the way French civil servants act with the public. One of the most common words describing them is condescending. French civil servants until very recently went to special schools to learn their job, and they thought of themselves as the best in the field. Furthermore, they have a special status that is underlined at all times: they work for the well-being of all, which means for the grandeur of France; they are part of a national mission, something that today might seem totally outdated and preposterous. Yet in the first half of the 20th century, especially before WWII, elementary school teachers were called « les hussards de la République » the warriors of the nation because they were seen as soldiers fighting to mold French youth into rational adults after the church and state split in 1905.
Nearly all major French corporations were created in the public sector or were taken over by the government and run by civil servants for a decade or more. Their privatization is something that happened fairly recently, starting in 1987, and really picking up steam in 1993, which for France is still quite recent.
I cannot explain why traditional French culture does not allow name-tags, but it is certainly the case more often than not. There is a general avoidance of wearing things that could indicate who you are. As far as the administration goes, the idea is that the service rendered is supposed to be perfect, no matter who does it, and there cannot be any difference from one civil servant to the next. We all know this is not true, but it was very much the goal for the entire public sector for at least a couple of centuries, and has only recently faded away. Given this assumption, it is useless to know the name of the person who took care of you last time.
This attitude also puts another very strong twist on the relationship with the civil servant. Again until very recently, there was a huge difference between being un usager and un client. The usager is someone being served by a civil servant, and a client is someone being served by the private sector. The civil servant is not there to do the job so that the person is happy with the work done; the civil servant is there to follow procedures and, to comply with regulations;, in short, there cannot be any special cases. It was always unthinkable that maybe the usager should be listened to and that it might be important for him to be happy with the service rendered. In the last 30 years, though, France has done an incredible amount of catching up on this issue. If you think it is still « Kafkaesque» and cold, think how it was just 30 years ago.
There are a few tricks I use to get around this preference for anonymity. If you have to write a letter or send a document, call and ask to whom it should be sent and what their position is. (You will be given the position more often than the name.) If you return to an administrative office, explain where the civil servant was sitting and the day and time you were last there. This is often enough to identify a colleague.
The key thing is to never fight this attitude; the civil servant will freeze up once and for all. And avoid as much as possible asking to see the manager. The best approach, if it can appropriately be used, is to ask the civil servant for help and show that you trust them to fix the problem because they are the pros. It does not work all the time, but when it does, these civil servants will be serious about finding a fix for the problem. Try to understand the logic here: if you put pressure on them, you create a power struggle and you find yourself alone, while the civil servant, or the employee for that matter, is supported by the entire hierarchy.
QUESTION
WHO MANAGES FRENCH RETIREMENT FUNDS?
It’s always with great interest that I read your newsletters. They are very informative.I have been working in France for a large corporation for several years now and once in a while I receive documents I do not understand. A couple of times I asked my colleagues what it was and their answer was,It is for your retirement, without any more explanation. My problem is that it comes from many different sources. I have identified two, C.N.A.V., and Malakoff Médéric. The last thing is that my employer opened a bank account without my permission, and I get a statement once a year. I still cannot make any sense of all this. Can you help?
ANSWER
I like to make comparisons between the French and American systems so the logic is understood, and then the specifics of the French system are a lot easier to understand. In the USA, there are three different ways, one contributes towards retirement. Payment to Social Security is mandatory; those funds are managed by the Social Security Administration. The employer may set up a retirement plan, 401K, Keogh plan or other, and most of the time there is a shared contribution. Finally, the employee can open a special account privately, most commonly an I.R.A. Aside from these options, some companies have profit sharing, investing this money either in shares of the company or in mutual funds.
In France, the Caisse Nationale d’Assurance Vieillesse, C.N.A.V., is the equivalent of Social Security, but only for employees; self-employed people pay into a different plan. Corporations like Malakoff Médéric, under government supervision, manage the retraite complémentaire. a mandatory contribution, which goes to two programs, the Association pour le Régime de Retraite Complémentaire des salarié s (A.R.R.C.O.), and the Association Générale des Institutions de Retraite des Cadres (A.G.I.R.C.) when the employee is a cadre, which means part of management. This is pretty much the only difference, and it allows managers to put more money towards retirement. Both the employee and the employer contribute, in ratios set by law. The employee has a virtual account opened which shows the credits earned in points, not a monetary amount. Law also regulates the conversion rate to a financial amount. In short, Malakoff Médéric is managing the money from the retirement plan of your employer, (similar to the 401K or, Keogh plan), with the difference that there is no choice and everything about the plan is regulated.
France does not really have an equivalent of an I.R.A.; the closest thing is assurances-vie. The amount in such an account is blocked for a minimum of eight years, after which growth in the principal becomes non-taxable. There is no obligation to take the money out, it just grows tax-free.
There is another set-up that is quite different in nature, that is, roughly the equivalent to profit sharing in the U.S.A.: either the Plan d’Epargne pour la Retraite Collectif (P.E.R.C.O.) or the Plan d’Epargne Entreprise (P.E.E.). As in the U.S.A. the employer actually puts money into a mutual fund, and an individual account is opened with the bank managing the fund. Since French banks create and manage mutual funds, you had the impression that the employer had opened a regular bank account, when in reality it is more like a portfolio account and you can see your money grow with further deposits and the gain from its management. The regulation once again is quite complex but just keep in mind that large employers must set these up.
There you have a description of the various types of retirement contributions in France. Almost all Western countries have similar set-ups mandatory, run by the state; an employee-employer program; private individual accounts; and profit-sharing plans. France makes a lot of this mandatory, while the U.S.A. makes it voluntary with fiscal incentives.
DISCLAIMER
Please forward this message to all those who would be interested in its contents. The information contained in this newsletter is intended only as general information. I strongly urge readers to seek professional guidance concerning the legal and tax matters mentioned. This newsletter is intended as a general guide and is not to be taken as professional advice.