Sanctioned free credit - when can a consumer exercise this right?

In the maze of regulations protecting consumers in the Polish financial market, the sanction of free credit remains one of the most effective tools for protecting the interests of borrowers. Although this mechanism has existed in Polish law for years, many consumers are still unaware of their rights.

What is the sanction of free credit?

The sanction of free credit is a power granted to consumers under the Consumer Credit Act of 12 May 2011. This mechanism allows the borrower to repay the amount borrowed without having to pay interest and other credit costs in the event that the lender has breached certain provisions of the Act.

When can you apply for free credit?

The basic grounds for exercising this power are breaches by the creditor of Articles 29, 30 and 36a-36c of the Consumer Credit Act. Typical breaches include:

1. Lack of required information in the credit agreement - The creditor is obliged to provide the consumer with a range of information, including, inter alia, the total amount of credit, the repayment terms and dates, the annual percentage rate of charge (APR), the total amount payable.
2. Incorrect determination of credit costs - This is particularly the case when costs are charged in contravention of the regulations.
3. Breach of the provisions on maximum non-interest credit costs - limits on fees and commissions have been in place since 2016.

How do I exercise my right to free credit?

To successfully invoke the sanction of free credit, the consumer should:

1. Analyse the loan agreement for potential breaches.
2. Submit a written statement to the lender to take the sanction of free credit.
3. If there is no response from the lender, consider the judicial route.

Case study

A client of our law firm concluded a loan agreement for the amount of PLN 10,000. After analysing the agreement, it turned out that the lender did not include information about the annual percentage rate of charge and did not provide a repayment schedule. After making an appropriate statement, the borrower had to return only the borrowed capital, saving more than PLN 4 000 in interest and additional fees.

Summary

The sanction of free credit is a powerful tool in the hands of consumers. It is worth remembering that there is a limited time limit for exercising this power, so if you have any doubts about the compliance of a credit agreement, you should consult a consumer lawyer immediately.