Poland - Advertising in shadow banking - report of UOKiK

'Cheapest loans on the market'. 'No spouse’s consent required'. 'On-the-spot cash withdrawal'.'Minimized formalities'. – Using this slogan a shadow banking institution encouraged consumers to take loans. Unfortunately, the analysis of UOKiK indicates low reliability of advertisements of such institutions. UOKiK has inspected 37 undertakings and two thirds of them raised objections of the Office.

From January to April 2013, the President of UOKiK examined advertisements of shadow banking institutions appearing in the press, on the radio, e-media, teletexts as well as leaflets and posters. In total, advertisements of 37 undertakings were taken into scrutiny, namely: the ones who entered into the highest number of contracts in 2012, noticed as a result of the Office’s monitoring of advertising, and selected at random. This is the first such analysis by the Office.

23 undertakings are using advertisements contrary to law. The analysis reveals that the inspected institutions are applying similar or even identical slogans. In most cases (9 undertakings)they offer No BIK-loans (Credit Information Bureau), thus implying the certainty of granting loans, most reasonable costs, best prices on the market, on-the-spot, which in fact is non-compliant with factual conditions (6), do not provide information on the cost of loan or other charges (6).

Furthermore, in some cases the information on the cost of loan was provided with illegible font (1), one undertaking was unlawfully using the Certificate of Reliability (pl. Certyfikat  Rzetelna Firma), another one stressed in its advertisement that consumers may withdraw from loan contract within 14 days, which in fact refers to any consumer credit contracts.

‘No BIK’

Most irregularities (9 undertakings) concerned these advertisements which contained the slogan No BIK, which implied that granting the loan is possible irrespective of a borrower’s financial condition. By contrast, the Act on consumer credit imposes on credit grantors an obligation to check the financial credibility of consumers. In the course of proceedings undertakings admitted that despite using such slogans, they examine the credit risk of their clients based on documents provided by a consumer or verification at branches of Biuro Informacji Gospodarczej (Economic Data Office). Based on the challenged slogans, clients could have deduced that their financial condition was of no significance to credit grantors and they could expect a loan at their discretion.

For this reason the President of UOKiK regarded such advertisements as misleading consumers. If they had realised the verification of credit risk is a must, they might not have used the services of shadow banking institutions. The Office instituted proceedings concerning the violation of collective consumer interests against all undertakings involved in the challenged advertisements.

‘Most favourable offer’

Some shadow banking institutions use special slogans to make their clients benefit from seemingly most favourable offers. Six undertakings included in their advertisements the following information: the lowest costs of loan in Poland, the cheapest offer of shadow banking loans. However, in the course of proceedings none of them proved that their offer was in fact the most favourable on the market. Consequently, the President of UOKiK regarded such advertising as misleading to consumers as they might have concluded contracts expecting the most favourable conditions. The President of UOKiK instituted the proceedings concerning the violation of collective consumer interests.

‘No extra charges’

Three undertakings were advertising their products with slogans informing in a direct way that a client would not bear any costs, or if any, they would be the so-called initial payments. In fact the consumer incurred the cost of e.g. registration charge, loan insurance or preparatory charge. The information on costs is vital when a consumer is to select a contractor. For this reason undertakings have to inform consumers of them in a reliable way. As a consequence, the Office instituted proceedings concerning the violation of collective consumer interests against shadow banking institutions which were misleading consumers.

No required information

The Act on consumer credit imposes specified informative obligations on gredit grantors advertising their products. Under the law, whenever a financial institution provides in advertisements the cost of loan, it is obliged to inform consumers also of the interest rate, loan value to be repaid, real annual interest rate, or the amount of instalments. Six undertakings did not fulfil this obligation. For example, the challenged advertisements contained exclusively the following slogans: only PLN 5 daily for a loan of PLN 600, or Take a 0 % loan and make your dreams come true. The undertaking failed to provide the necessary data on other charges. UOKiK instituted the proceedings concerning the violation of collective consumer interests against any entities infringing the obligation.

Actions taken by UOKiK

Advertisements of 37 entities were taken into scrutiny. As a result, the Office challenged the practice of 23 shadow banking institutions. The President of UOKiK initiated proceedings against any financial institutions violating consumer rights. Any undertakings misleading consumers may be imposed a fine of up to 10% of their revenue gained in the previous year.

Consumer assistance

Whenever problems with repayment of liability arise, let’s address the financial institution. Whenever a credit grantor refuses to accept a complaint, or applies clauses  contrary to law, we can seek assistance at the poviat and municipal consumer ombudsmen, or at 800 007 707. Free of charge assistance is also available at the Association of Polish Consumers and local branches of the Polish Consumer Federation. For more information on financial services, please follow the FAQs section available at the website of UOKiK.