If the lender breaches at least one obligation imposed on him by the Consumer Credit Act, the borrower may use the free credit sanction. Unfortunately, not many consumers know about this and put it into practice.
Poles are eager to take out loans and credits. In 2018 alone, banks granted 3.6 million loans for a total amount of USD 13.4 billion, and loan companies – 571 thousand. loans for a total amount of USD 5.2 billion, according to Credit Checker data. Regardless of whether loans were taken from the bank or loans from loan companies, a contract was concluded between the client and the financial institution.
Such a contract must contain certain elements that have been imposed by the legislator in order for formalities to be deemed to have been completed in accordance with the law and the contract is binding in its entirety on all parties. The problem arises when the credit agreement contains errors, deficiencies or shortcomings.
There are legal sanctions in Polish law that can be applied when an economic entity violates individual consumer interests. At the same time, this is not a complaint procedure or warranty. A good example of such sanctions is the free credit sanction in credit relations.
It results in depriving the lender (this also applies to lenders) of revenues that he expected to receive from the loan agreement. The reason, however, is a breach of obligations arising from legal provisions, which we will write about in more detail later in the article.
The free credit sanction appeared in Polish legislation first in art. 15 of the Act of 20 July 2001 on consumer credit, and currently its principles and scope are defined in art. 45 of the Act of May 12, 2011, on consumer credit. The change was caused by the need to implement Directive 2008/48 / EC of the European Parliament and of the Council of April 23, 2008, on consumer credit agreements (especially Article 23).
These are liabilities that do not exceed USD 255,550 (maybe the equivalent in a foreign currency). It must immediately be made clear that the term consumer credit includes both a loan agreement in accordance with art. 69 clause 1 of the Act of 29 August 1997 Banking Law and the loan agreement pursuant to art. 720 § 1 of the Civil Code or a sales contract with deferred payment in accordance with art. 535 of the Civil Code.
However, this sanction cannot be applied to mortgage contracts and to the contracts listed in art. 4 clauses 1 of the Consumer Credit Act (e.g. reverse mortgage loan).
It should be emphasized that the free credit sanction is primarily to mobilize the lender to comply with certain legal provisions and at the same time is to protect the interests of the consumer. The latter receives a tool that allows him to effectively assert his rights in relation to the often powerful and strong financial institution.
However, many consumers do not even know that they have such a legal instrument at their disposal and that is why the effectiveness of this sanction in Poland has been very low over the past few years. Fortunately, this is changing and the interest in free credit sanction is growing.
The free credit sanction may be applied if the lender has violated one of the obligations imposed on him by the Consumer Credit Act in art. 45 paragraph 1. At the same time, the breach of the law by the creditor may concern the form of the loan agreement (Article 29), the content of the contract (Article 30 (1) points 1-8, points 10-11, points 14-17, Article 31- 33), the amount of non-interest loan costs (Articles 36a-36c) or the amount of fees for late payment of liabilities (Article 33a).
The abovementioned violations are divided by lawyers into two categories. The first concerns breaches in the information sphere made by the lender (e.g. omission of a mandatory element, providing the consumer with incorrect or incomplete information, and even incomprehensible). It is mainly about the form and content of the loan agreement. This violation occurs when the loan agreement is concluded.
The second category of infringements concerns the protection of consumers against excessive financial burden as a result of the loan agreement. Such deficiencies may occur both at the time the loan agreement is concluded and at a later stage of its enforcement.
It should be emphasized that in the case of free credit sanctions, the scope of the default, its weight or the scope of the negative impact on consumer interests are irrelevant. The lender is responsible for both intentional violation and failure to exercise due diligence in the performance of their duties.
The free credit sanction arises both when the breach occurred as a result of the lender’s own actions and the agent acting on his behalf (e.g. a loan broker). However, it should be emphasized that pursuant to art. 6 of the Civil Code, it is the consumer who must demonstrate that the creditor has violated the obligation listed in art. 45 item 1 of the Consumer Credit Act.