Free Credit Sanction
Kancelaria Lexitor
Free Credit Sanction
1. Legal Basis
1.1 Art. 45 of the Consumer Credit Act – pertains to consumer credits granted after December 18, 2011 (the date of entry into force of the Consumer Credit Act), which implements Art. 23 of the European Parliament and Council Directive 2008/48/EC of April 23, 2008, on credit agreements for consumers and repealing Council Directive 87/102/EEC.
2. Structure of Free Credit
Every consumer credit agreement must contain specifically defined elements, primarily for informational purposes. These elements are listed in Art. 30 of the Consumer Credit Act. To utilize free credit, it is necessary for the borrower to make a legally formative written declaration. In legal doctrine (commentators’ opinions) and in some court rulings, there is a view that the sanction of free credit should be considered ex officio. Proponents of this theory refer to historical and purposive interpretation. Personally, however, I believe that utilizing the free credit sanction requires a written declaration by the borrower, which is justified by linguistic interpretation.
3. Effects of Free Credit
The absence of some elements or their incorrect definition in a consumer credit agreement will result in the transformation of the credit into what is known as free credit. It is important to note that even a single discrepancy, such as incorrect indication of the “total cost of credit” or the “actual annual interest rate” in the credit agreement, will result in the effect of free credit (of course, after making the appropriate declaration). Every deficiency in the agreement must be carefully analyzed, as not every one will qualify the agreement for free credit, e.g., a clerical error. In the case of a consumer credit agreement, the effect of declaring free credit will be the right to repay the credit according to the established schedule without interest or other costs, and if these have already been paid, the borrower will be entitled to their recovery. In practice, banks consistently refuse to voluntarily recognize borrowers’ claims under free credit. This is primarily due to their economic interest, but also due to the lack of personnel with the knowledge and competence to consider often complex legal issues in banking institutions. Therefore, cases concerning free credit most often end up in court.
4. Deadline for Making a Declaration of Free Credit
This is 12 months from the date of the execution of the consumer credit agreement. The concept of execution of the agreement should be considered from both sides, as a credit agreement takes the form of a mutually binding agreement. It is worth noting that, according to Art. 52 of the Consumer Credit Act, the lender is obligated to settle the credit within 14 days from the date of its full repayment. Thus, it may turn out that a credit granted e.g., in 2012, which was not properly settled by the bank, e.g., by failing to refund part of the commission, may be eligible to be transformed into free credit.
5. Example
In 2018, the spouses K.L. and M.L. entered into a consumer credit agreement with bank B. in Warsaw for the amount of 126,000 PLN, for which they paid, among other things, a commission for the grant of credit in the amount of about 14,000 PLN. Analysis of the content of the agreement led to the conclusion that it contains deficiencies including incorrectly specified values of the “total cost of credit” and “actual annual interest rate of the credit.” As a result, the borrowers availed themselves of the right to free credit, which entails the bank’s obligation to refund the interest and commission for granting the credit in the total amount of about 45,000 PLN.
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