Will an avalanche of disputes over free credit sanctions set off?

At the outset of the consideration, it is necessary to cite Article 45 of the Law on Consumer Credit (hereafter: the CCA), according to which, in the event of violation by the creditor of art. 29 par. 1, art. 30 par. 1 point 1-8, 10, 11, 14-17, art. 31-33, art. 33a and art. 36a-36c, the consumer, after submitting a written statement to the creditor, shall return the credit without interest and other credit costs due to the creditor at the time and in the manner established in the agreement. This entitlement shall expire one year after the execution of the agreement.

The above sanction is intended to protect the interests of the consumer by depriving the lender of revenue from consumer credit, due to violation of the obligations specified in the law regarding the content of the contract or limits on non-interest expenses. If this sanction is applied, the borrower remains obligated to reimburse the lender for the loan principal used.

Three very important questions have been submitted to the Supreme Court (hereinafter: SN), which overlap with those already submitted to the Court of Justice of the European Union (hereinafter: CJEU). They will help resolve three fundamental questions, crucial from the point of view of borrowers and the possibility of benefiting from the sanction of free credit, viz:

1. What is the statute of limitations for claims under the free credit sanction?
2. What is the method of calculating interest on part of the loan,
3. And the miscalculation of the annual interest rate and the total amount to be paid by the consumer.

Although the line of jurisprudence in cases involving the sanction of free credit, is not yet formed, as in the case of franking cases, nevertheless there have already been several favorable judgments in Polish courts, for example:

For example, the District Court in Sieradz, in a judgment dated January 11, 2023, in the case file I Ca 478/22, held that: “(…) the total amount of credit is nothing more than the amount of capital granted by the creditor, which the consumer receives at his free disposal. The commission fee, i.e. the cost of the loan, even though it is credited by the lender is still a cost. Therefore, it is unlawful for the borrower to charge interest on the credited commission (…).”

A similar ruling was made in the case ref. no. VI ACa 560/16 in the judgment of February 15, 2007 issued by the Court of Appeals in Warsaw “(…) Since, against the background of Article 5(7) of the ACCC. “total amount of credit” means the funds actually made available to the consumer, then – in the opinion of the Court of Appeals – in the event of withdrawal from the agreement, the consumer is obliged to pay interest calculated only on the funds actually made available to the consumer, i.e. on the ‘total amount of credit’. Thus, there is no basis for charging the consumer interest on the cost of credit, even in the case of granting credit to finance these costs (…)”.

In addition, it is worth noting the decision of the President of the Office of Competition and Consumer Protection dated December 30, 2021. (No. DOZIK-17/2021), issued in a case against Santander Consumer Bank S.A., based in Wroclaw, in which it was found that the bank’s action constituted a practice that violated the collective interests of consumers. The said violation consisted in misleading consumers about the proportion between the total cost of credit and the total amount of credit, by presenting in consumer credit agreements and in the information forms accompanying them, information about the total amount of credit calculated on the assumption that it should take into account credit costs – the insurance premium. This action constitutes an unfair market practice within the meaning of Article 5(1) and (2)(1) in conjunction with Article 4(2) of the Act of August 23, 2007 on counteracting unfair market practices (Journal of Laws of 2017, item 2070) and harms the collective interests of consumers, and consequently also constitutes a practice that violates the collective interests of consumers, as referred to in Article 24(2)(3) of the Act of February 16, 2007 on competition and consumer protection.

So, as you can see, the topic is topical, and the questions raised are of fundamental importance for protecting the rights of millions of borrowers in Poland. If the CJEU and the Supreme Court issue favorable verdicts/rules for borrowers, lenders will be obliged to adjust their practices, including changing the way they inform about the rules of early loan repayment to the new standards, and this could start an avalanche of lawsuits against lenders.

If you have concerns about a loan agreement you have entered into, we invite you to contact us.