New anti-usury law

On 6 October, the Sejm adopted a law amending certain acts to counteract usury. The so-called anti-usury law, according to the authors of the government bill, aims to undertake comprehensive and coordinated measures both in criminal law and through intervention in civil law relations, targeted at eliminating the pathology of usurious loans. To a limited extent, anti-usury provisions have existed in Polish legislation since 2001 (initially in the Consumer Credit Act), but a report prepared by the Advisory Scientific Committee at the Financial Ombudsman, as well as the number of complaints submitted to the Ombudsman, indicates that the existing regulations have not sufficiently met their intended goals.

Existing anti-usury provisions are insufficient

Findings from the above-mentioned report showed that lending institutions operating on the Polish financial market continue to commit abuses against consumers (there is a noticeable upward trend in the number of complaints lodged by consumers). Irregularities vary in nature and occur both at the pre-contractual stage and during the conclusion and performance of the contract. Lenders structure the contract terms to burden the client with the highest possible non-interest loan costs. There is also frequent artificial extension of the consumer credit repayment period, which allows the lender to charge higher non-interest costs. A significant problem in the non-bank consumer credit market is the application by lending institutions of very high fees and commissions, which are excessive relative to the credit services provided and in most cases disproportionate to the lender’s activities performed.

Main changes introduced by the amendment

1. The new law provides that on the day of concluding the contract, the amount of non-interest costs (including additional service costs, in particular insurance) shall not exceed twice the statutory interest, i.e. the amount specified in the formula contained in the proposed Article 720(2) § 1 of the Civil Code (hereinafter the C.C.), which in turn refers to the maximum interest level set according to Article 359 § 2(1) C.C. Compared to the solutions adopted in the Consumer Credit Act, a loan granted under the Civil Code will on one hand be less profitable for the lender, and on the other less costly for the borrower, than loans granted within strictly regulated business activity. This difference results from the absence of additional costs related to business operations and compliance with supervisory requirements, as well as higher standards of transaction safety guaranteed by professional entities (e.g. in terms of information obligations or protection against lending to insolvent persons).
2. Non-interest costs over the entire loan repayment period may not exceed 25% of the total loan amount. If non-interest costs exceed this maximum level, only the maximum non-interest costs shall apply.
3. The total security for claims related to the loan shall not exceed the sum of the loan principal increased by statutory interest calculated directly on that amount for the loan period, maximum default interest calculated on the loan amount for up to 6 months, and maximum non-interest costs. Furthermore, security in the form of a mortgage or registered pledge will be prohibited. This change aims to strengthen the protection of natural persons who have been granted monetary loans against unjustified restrictions on their ability to manage their own property.
4. The lender will be obliged to inform the consumer in a clear and understandable manner about the total amount the consumer will be required to pay under the contract.
5. In the case of early repayment of the loan, interest cannot be charged for the period remaining until the end of the term for which the loan was granted under the contract. Meanwhile, non-interest costs shall be reduced by the costs relating to the period by which the loan term has been shortened, even if the borrower incurred those costs before early repayment.
6. The maximum amount of non-interest costs of a consumer credit calculated according to Article 36a(1) of the Consumer Credit Act will be reduced to 10%. Currently, these values are respectively 25% (costs independent of the credit period) and 30% (costs dependent on the credit period). Independently of the above, the limit on non-interest costs over the entire credit period will be lowered from the current 100% of the credit amount to 45% of that amount.

The law is to come into force within 6 months of its publication. Some provisions will apply from 1 January 2023.

We invite you to cooperate

ATL LAW law firm has experience in legal advice in competition law and consumer protection law for entities representing various sectors of the economy. We provide services to both Polish and foreign clients. If you have any doubts regarding compliance of your current practices with the new regulations due to the upcoming amendment, please contact us and learn more about our Competition and Consumer Protection Law offer.