Free Loan Sanction – a Consumer Protection Tool

Holders of loans in Polish zloty, similarly to borrowers of Swiss franc loans, may benefit from the possibility of complete exemption from loan costs.

The free loan sanction (SKD) is one of the most important rights granted to consumers in their dealings with financial institutions. Its essence lies in the fact that if the lender fails to meet statutory obligations, the borrower may repay only the principal of the loan – without interest or additional charges.

Consumer Credit as a Condition for SKD

The right to apply the free loan sanction is reserved exclusively for consumer loans, meaning loans taken for purposes not related to business activity. According to the law, their value may not exceed PLN 255,550, although there is an exception for non-mortgage loans intended for home or apartment renovation – in such cases the amount may be higher. Since January 2024, the sanction also applies to loans contracted by individuals running agricultural holdings.

Types of loans and credits covered by SKD

Agreements eligible for SKD include, among others, loans, bank credits, agreements postponing payment deadlines, or leasing contracts with an obligation to purchase. The sanction also covers certain mortgage loans concluded within specific timeframes and amounts. Excluded, however, are mortgage loans contracted after July 2017, employee loans on preferential terms, reverse mortgages, or pawnshop loans.

Violations That Trigger SKD

The legal basis for SKD is Article 45 of the Consumer Credit Act of May 12, 2011. A single violation of informational or formal obligations by the lender is sufficient for the consumer to invoke SKD. This may include failure to prepare the consumer credit agreement in the required form, incorrect calculation of the Annual Percentage Rate (APR), lack of information on interest rate changes, or exceeding the maximum non-interest costs.

As a result, the consumer gains the right to settle the loan solely in terms of the borrowed principal, without the obligation to pay interest or additional fees.

Deadlines and Procedure

The consumer has one year from the execution of the agreement to submit a declaration of intent to use SKD. Execution of the agreement means not only repayment of the loan but also release of securities and issuance of relevant documents. The declaration should preferably be submitted in writing, specifying the violations, which increases the chance of an amicable settlement. In practice, however, banks often reject such requests, leading to court disputes.

Effects of Applying SKD

Once the declaration is effectively submitted, the consumer repays only the principal of the loan, and if interest or fees have already been paid, they may demand reimbursement. The sanction does not entitle the borrower to stop repayment altogether – principal installments must still be paid according to the contract. If the agreement does not specify a repayment term, consumer loans up to PLN 80,000 are repaid in equal monthly installments over five years, while loans above this amount are repaid over ten years.

Benefits for the Consumer

Applying SKD results in a real reduction of loan costs, reimbursement of overpaid interest and fees, and prevents the bank from terminating the agreement due to the use of this mechanism. Importantly, SKD does not negatively affect the consumer’s future creditworthiness assessment.

Conclusion

The free loan sanction is a powerful consumer protection tool that limits loan costs to the principal alone. Its effectiveness depends on proper preparation of the declaration and determination in pursuing one’s rights, often in court. With the growing number of credit disputes, SKD is becoming an increasingly important element of balance between consumers and financial institutions.