Accessibility and Plain Language in Credit Agreements

In recent years, interest in simplifying the language of legal documents, including credit agreements, has grown significantly. The reasons are both practical and legal – from the need to increase consumer understanding of documents, to obligations arising from civil and EU law. It is no secret that the complexity of legal language still poses a barrier to fair and transparent borrower–lender relations.

1. The requirement of contract transparency under the law

According to Article 385 § 1 of the Polish Civil Code, provisions of a contract concluded with a consumer that have not been individually negotiated are not binding on them if they shape their rights and obligations in a manner contrary to good practices and grossly infringe their interests.

One of the key elements in assessing whether a provision is “abusive” is linguistic clarity. Civil law therefore requires that contracts – especially those concluded with consumers – be transparent, unambiguous, and drafted in language understandable to the average recipient.
Credit agreements are often lengthy documents containing specialized terms from finance, law, and banking. While from the perspective of a financial institution the use of formalized language ensures precision, for the consumer it may mean a lack of understanding of essential obligations and risks, such as variable interest rates, non-interest costs, or the mechanism of early repayment. Using plain language means abandoning excessive technicality and overly complex sentences in favor of simple and clear communication.

2. Case law and market practice

The Court of Justice of the European Union has repeatedly emphasized the importance of transparency in credit agreements, stressing that consumers must be able to assess the economic consequences of a contract on the basis of clear and understandable wording.
In Poland, common court rulings have followed this line, declaring clauses concerning the indexation of foreign currency loans non-binding where the consumer was not properly informed about how these mechanisms worked and the potential risks involved.

3. Benefits for both parties

The Consumer Credit Act (Journal of Laws of 2023, item 1020), in Articles 9 et seq., obliges lenders to provide information to consumers in a clear, concise, and understandable manner – both before and during the contract. Using plain language therefore ensures compliance with this requirement.

Contrary to common belief, using plain language in contracts does not reduce the legal protection of financial institutions – on the contrary, it increases the effectiveness of enforcing claims by eliminating the argument that the client did not understand the terms of the contract. Moreover, linguistic transparency builds customer trust and reduces the risk of litigation.

For clients, transparent language in credit agreements offers an opportunity to overcome a previously insurmountable barrier and to truly understand the obligations they undertake.

The accessibility and linguistic clarity of credit agreements are not only an example of good market practice but also a legal requirement. Introducing plain language into credit agreements improves consumer protection, supports the principle of contractual fairness, and strengthens the lender’s position in the event of disputes. Nevertheless, excessive simplification of the language in such documents may result in insufficient protection for lenders. The market and the outcomes of the first lawsuits based on plain-language credit agreements should provide the answer as to whether this change benefits everyone.