The free credit sanction was created specifically to protect borrowers from abuses by banks or loan companies. Who does this legal institution apply to?

What does the free credit sanction involve?

It is a legal institution that protects borrowers against unfair practices by lenders. If abuses occur, the costs of the loan are reduced—often even to zero. When a bank or loan company uses practices that are not compliant with the law, the consumer may appeal. Through the free credit sanction, the lender loses its income in the form of commissions and interest.

The consumer only needs to submit an appropriate statement after noticing that certain oversights or unfair practices have occurred. It is therefore worth checking the loan agreement carefully. Any errors work exclusively to the consumer’s advantage. The borrower may declare their intention to invoke the free credit sanction as soon as they notice the oversights.

This legal institution was initially defined in Article 15 of the Consumer Credit Act of 20 July 2001. It was later described in detail and began to be used to counteract unfair lenders. Everything about the free credit sanction can be found in the Consumer Credit Act of 12 May 2011 (Article 45).

Who may the free credit sanction apply to?

Any borrower who notices unfair practices or oversights on the part of the lender may use the free credit sanction. It is worth noting that this applies both to banks and external loan companies. Violations can be divided into:

  • Informational—when a bank or loan company fails to fulfill its information obligation, the free credit sanction may be used. The lender is obliged to provide information about all costs of the financial product, the terms for withdrawing from the agreement, and repayment dates.
  • Related to protecting the borrower against excessively large financial obligations—banks and loan companies may not enter into agreements that are unfavorable to the borrower. The borrower is protected by law so that companies are prevented from driving clients into excessive debt.

If any type of violation occurs, the free credit sanction may be used. It is important to know that the statement must be in writing and submitted by the borrower personally. The lender should receive the document without any intermediaries. A response to the statement is, of course, mandatory.

What conditions must be met to use the free credit sanction?

This legal institution applies only to consumer loans amounting to up to PLN 255,500 or the equivalent in another currency. Naturally, violations must have occurred in order to support a statement of intent to invoke the free credit sanction.

Oversights or unfair practices by a bank or loan company should be properly proven. When the case is considered, the evidence must be sufficient—otherwise, the document will be rejected, exposing the consumer to additional waiting time.

The free credit sanction may be used within 1 year from the date the agreement is performed. This means that the institution remains available even after all installments, including the commission and interest, have been paid. The 12-month period is counted from the moment the borrower pays the final amount due. It is worth noting that the statement may also be submitted much earlier. When a violation occurs, the consumer may report unfair practices immediately.