Changes in credits. There is a project

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Transparent and comprehensible information, enhanced consumer protection, and a prohibition on advertisements that portray loans as a means to elevate one’s quality of life – these are the primary goals of the proposed Consumer Credit Act. The upcoming regulations aim to bring national law in line with EU directives.

On Monday, the Government Legislation Centre released a draft law concerning consumer credit, formulated by the Office of Competition and Consumer Protection (UOKiK). As outlined in the Regulatory Impact Assessment, these new regulations are designed to synchronize Polish law with the latest EU directives on credit agreements while safeguarding the interests of borrowers.

Modifications to credit. Draft

The legislation outlines, among other things, the principles and procedures for forming consumer credit agreements, the responsibilities of the lender and intermediary regarding pre-contractual information, the obligations of the parties involved in a consumer credit agreement, and the rights of consumers arising from the agreement. Current regulations concerning specific credit agreements, such as loan agreements and loans granted by cooperative savings and credit unions to their members, will remain unchanged.

The proposal suggests eliminating the maximum limit above which the Consumer Credit Act does not apply. Presently, this limit is set at €75,000. The EU directive raises this threshold to €100,000, but the Office of Competition and Consumer Protection (UOKiK) intends for the proposed law to cover the entire consumer credit market, guaranteeing uniform protection for all consumers. Simultaneously, to facilitate immediate loan acquisition, the possibility of initiating the contract with the borrower’s consent will be introduced.

Credit information

Changes impacting lenders will include, among other aspects, the extent of information they must present in advertisements. A mandatory warning will be implemented stating that obtaining a loan incurs costs, which must be communicated clearly or „in a distinctly audible manner.” Advertisements that imply a loan enhances one’s financial situation, and those suggesting that existing debts in databases minimally affect the likelihood of securing a loan, will also be prohibited. Additionally, advertisements will not be allowed to imply that a loan expands financial resources or can enhance one’s quality of life.

Lenders will also be obligated to simplify the information provided prior to entering a contract. The presentation is to be more user-friendly, ensuring that „the most crucial information about the loan is included on the first page of the information form.”

Furthermore, lenders will have to remind consumers of their right to withdraw from a contract if pre-contractual information was provided less than one day prior to the contract’s conclusion, as well as to provide customers with suitable explanations separate from the pre-contractual information. These explanations will assist consumers in evaluating whether the loan meets their needs and clarifying the repercussions of, for instance, failing to repay.

Creditworthiness and liabilities

The Office of Competition and Consumer Protection (UOKiK) aims to enforce a clear prohibition on extending credit when creditworthiness is assessed unfavorably. It will also clarify that creditworthiness assessments are based on „relevant and accurate information regarding the consumer’s income and expenses, as well as other pertinent financial information necessary and proportionate to the specific credit and associated risks.”

If a loan is issued without a credit check, a free loan sanction is proposed. Consumers should also have access to a „clear and comprehensible explanation of the creditworthiness assessment” from the lender.

Measures have also been developed to motivate lenders to restructure loans when repayment challenges arise.

The proposal also stipulates that a lender may seek compensation from the borrower for early repayment of a fixed-rate loan when the repayment amount surpasses a specified threshold, not exceeding €10,000 within a 12-month timeframe. The EU directive allowed for higher compensation if the lender could demonstrate greater losses than the standard compensation – the Office of Competition and Consumer Protection (UOKiK) has opted not to adopt this option.

So-called bundling will be introduced, permitting lenders to require consumers to maintain an account if it is solely utilized for loan-related purposes. Fees for account maintenance cannot be altered during the contract term.

Customer protection

Charging fees for consumer credit prior to finalizing a contract and selling unrelated products and services – apart from complimentary offers – will be forbidden.

Lenders may require consumers to have insurance, however, the customer will retain the option to choose an insurer other than the one favored by the lender. Additionally, lenders will be prohibited from using the terms „advisory services” and „consulting” when offering such services.

The Office of Competition and Consumer Protection (UOKiK) also aims to safeguard the rights of consumers using credit cards. „A protective framework will be established for payment card agreements made with consumers by lenders and credit institutions (…) regarding, for instance, disclosure obligations and a cap on non-interest loan costs,” stated the OSR.

As emphasized by the antitrust office, its analyses indicate that for non-bank entities, credit cards could „effectively serve as a cash loan mechanism utilized to circumvent the statutory cap on non-interest costs for consumers.”

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