Poland - Consumer credit - new regulations in six months

In six months new loan granting regulations will come into force. Longer time for withdrawal and inclusion of higher amounts in the regulations - are the main changes resulting from the new Consumer Credit Act, signed by the President of the Republic of Poland.

A consumer credit is any credit taken out for purposes unrelated to business activities (e.g. cash credit). We deal with consumer credit also when buying on instalment plan or in the case of purchases with deferred payment. The issue of credits up to PLN 80 thousand or the equivalent thereof in a foreign currency is regulated in detail by the Consumer Credit Act of 2001. However this will continue to be the case only for another six months. The new consumer credit act, with assumptions developed by UOKiK was signed by the President of the Republic of Poland and published in the Journal of Laws. This means that it will take effect on 18th December. Agreements concluded before that date will be subject to the existing regulations.

First of all, the new regulations will facilitate consumer borrowing in other countries of the European Union and standardise consumer protection. They will cover credits of up to PLN 255 550 (or the equivalent in a foreign currency). The Act will have to be applied to all financial institutions, including Credit Unions (e.g. SKOK) and para-banks (also in the area of consumer credit risk assessment). What changes are introduced by the new act of law?

• 14 days for withdrawal from agreement

  The consumer will not bear any costs associated with withdrawal from the agreement, except for interest accrued from the date of credit payout until the date of repayment

Under the existing regulations consumer is allowed to withdraw from a concluded agreement within 10 days from the date of signature, without providing any reason. The new regulations will extend the deadline for withdrawal from agreement to 14 days since the date of conclusion thereof. The consumer will not bear any costs associated with withdrawal from the agreement, except for interest accrued from the date of credit payout until the date of repayment. In the case of consumer’s withdrawal, the lender shall not be entitled to impose any charges except for expenses paid to public administration offices and notarial fees.

• Mortgages

Agreements on credit indexed to foreign currencies will additionally include information on the manner and time of fixing the exchange rate

The new rules deal with mortgages only to a small extent, and inter alia include information provided to the consumer. Before the conclusion of agreement, consumer will have to be informed about such details as the total amount of credit, own contribution required, the terms and conditions of repayment, the total amount to repay and the cost of credit. Agreements on credit indexed to foreign currencies will additionally include information on the manner and time of fixing the exchange rate, which will be used in particular to calculate the amount of credit to be paid out, as well as the principles governing the conversion of payout and repayment of credit into the foreign currency. All data will have to be provided by the lender on the information form.

• Fees and charges

The new regulations eliminate the maximum threshold of 5 percent of the total amount of all fees, charges and other costs associated with the conclusion of a consumer credit agreement. The existing access to information on all costs will be ensured by a mandatory form. This will allow access to full information on all costs incurred as a result of entering into an agreement. It will facilitate not only the comparison of different offers, but also help avoiding the risk of incurring exorbitant fees or charges.

• Early repayment

Under the new regulations crediting institutions will be entitled to receive compensation in the case of early repayment. Under the current law on consumer credit, early repayment is not subject to any charges. The newly introduced changes will not however apply to all credits, and will only include fixed interest loans, and only when the amount repaid before the due date exceeds within 12 months a specified value (in Poland – it is three times the average wage in the corporate sector – as quoted by the Central Statistical Office).

• Advertising information

There is a lot of emphasis on the way of communication with potential customers through advertisements. The new law requires that in addition to the actual annual interest rate, the consumer receives the entire package of detailed information whenever the lender provides the cost of obtaining such a loan, including the total amount of credit, the interest rate and specification of fees included in total cost of the loan.

Read the press release.