Polish courts are seeing a surge in lawsuits related to the “free loan sanction” (sankcja kredytu darmowego or SKD). By the end of August last year, approximately 10,000 such cases were pending, a number that grew to an estimated 11,000–12,000 by year-end, according to the Polish Bank Association (ZBP). The free loan sanction applies to borrowers whose banks failed to properly inform them about fees, interest rates, or other key credit terms. A favorable ruling for consumers can mean they only repay the borrowed amount without any additional costs.
“The free loan sanction is a legal mechanism aimed at preventing unfair practices in the offering of consumer loans by banks and non-bank institutions. It primarily applies to unsecured loans of up to approximately 250,000 PLN,” explained Andrzej Zorski, an attorney at Pilawska Zorski Adwokaci, in an interview with Newseria.
What Is the Free Loan Sanction?
The SKD applies to loans governed by Poland’s Consumer Credit Act. These loans typically lack a specified purpose or indicate a general consumer purpose, with amounts ranging between 255 PLN and 550 PLN. They mainly include cash loans, short- and medium-term loans, and installment purchase loans. The Act outlines strict requirements for consumer loan agreements, such as details about the loan’s term, total amount, interest rate, repayment terms, and annual percentage rate (APR).
“These are primarily informational and substantive requirements designed to protect consumers from predatory lending and a lack of transparency about loan terms. Cash loans are often taken out quickly without the lengthy application process seen with mortgages, so lawmakers introduced protections to safeguard consumers against dishonest institutions. This includes requirements for clear disclosure of the APR and the total cost of credit,” Zorski explained.
If a lender fails to meet these requirements—such as providing incomplete information or omitting mandatory details—borrowers can invoke the SKD. Violations often involve failing to sign the loan agreement in the required format or omitting key information such as the type of loan, its total amount, term, repayment method, or associated costs.
“In our experience, nine out of ten such loan agreements fail to meet the required standards. The law is clear: if the bank does not comply, the loan effectively becomes interest-free. Borrowers only repay the principal amount, while all interest and additional costs are waived. For instance, if a borrower has a 10-year loan, they will continue repaying over 10 years but only the principal, which often accounts for just one-third or one-fourth of the installment,” added Zorski.
Significant Financial Implications
The Polish Bank Association notes that lawsuits invoking the SKD are becoming increasingly common. While only 100–200 such cases were filed in 2021, the number surged to over 10,000 last year, reflecting a clear upward trend. With approximately 18–19 million consumer loans currently active in Poland, the potential for lawsuits is vast.
“If we assume that nine out of ten agreements are eligible for legal action under the SKD, there could be several million cases in total. Banks, of course, dispute these claims, so borrowers often have to fight in court, much like in the earlier wave of Swiss franc loan cases,” said Zorski.
Role of the EU Court of Justice
Decisions from the Court of Justice of the European Union (CJEU) are expected to play a crucial role, as they did in the Swiss franc loan cases. Several Polish courts have referred questions to the CJEU, with around 15 legal queries currently pending. The first rulings are anticipated in February 2025.
“There are already 15 questions related to various aspects of the free loan sanction submitted to the CJEU. We expect favorable outcomes for consumers, which could mean success rates similar to those in Swiss franc loan cases—potentially exceeding 90%,” Zorski predicted. “When we began handling Swiss franc loan cases in 2015, there were very few favorable rulings. In comparison, the SKD cases are starting off much stronger, with initial rulings already in favor of consumers. However, the scale of these cases and the potential financial impact on the banking sector could be even greater.”
Banks Call for Legal Reforms
The ZBP points out that claims invoking the SKD are often initiated not by consumers but by claims management companies. These lawsuits sometimes hinge on minor or even absurd allegations, such as the absence of an email delivery address (not required by law) or incorrect identification of the supervisory authority (e.g., listing “UOKiK” instead of “President of UOKiK”). According to the ZBP, this misuse of the SKD distorts the regulation’s original intent, which was to protect consumers.
The association has proposed amendments to the law, arguing that the current regulations, introduced in 2011, are disproportionate. For instance, the SKD does not require that a lender’s failure to comply negatively impact the borrower’s financial situation. The ZBP emphasizes that regulatory conditions have evolved since 2011, with new measures now in place to protect borrowers from market abuses.
Source: ManagerPlus
