In September 2019, the Court of Justice of the EU ruled that if consumers pay back their loan ahead of schedule, the bank must give them back all loan-related costs proportionately reduced. The Office of Competition and Consumer Protection and the Financial Ombudsman presented this position in May 2016. However, many banks and other financial institutions retained all fees charged in the event of early repayment of consumer credit. UOKiK issued three other decisions regarding the early repayment of consumer loans.
The latest decisions of UOKiK were addressed to three companies which, in the event of early loan repayment, retained in whole either a single fee, such as a preparation fee or a commission, or several fees, including a fee for creditworthiness valuation and contractual penalties.
The companies are obliged to immediately discontinue using this practice. In addition, as soon as the decision becomes final, they must inform all their consumers, who paid their loans off ahead of schedule of it. Therefore, consumers will find out that they may file a complaint and claim a reimbursement of unduly charged fees (in part). If they do so, companies must give them the money back within 30 days.
Incorrect settlements regarding early repayment are not the only practices that have been questioned. For instance, the former artificially inflated the amount of non-interest loan costs, which may not exceed either the total loan amount or the sum calculated according to the formula from the Consumer Credit Act. The latter, on the other hand, added the commission it had deducted to the amount that consumers received as the loan amount. This resulted in borrowers’ excessive debt. So the President of UOKiK imposed a fine amounting to more than PLN 483,000.
The charges against iCredit concerned the artificial extension of the loan repayment period and imposing contractual penalties for failure to provide a surety. The company set the instalments in such a way that first they were equal, and when the loan was almost paid off, consumers were required to pay several dozen, and in some cases even more than 100, extra instalments amounting to several large amounts. As a result, the repayment period was significantly extended, which allowed the company to charge higher non-interest loan costs. According to the formula, their maximum amount depends on the loan repayment period.
Furthermore, UOKiK had reservations about contractual penalties that iCredit imposes if borrowers fail to provide a surety agreement within three days.
“In our opinion, this is not a contractual penalty, because it is not about compensation for damage suffered by the company. This is more of a fee for increased credit risk. Moreover, it is contrary to the purpose of surety, because instead of reducing the likelihood that consumers will not be able to pay the loan off, it actually increases it as consumers are charged with extra costs. If borrowers fail to provide surety, the company should demand another form of collateral, refuse the loan or offer a lower amount instead of imposing contractual penalties on them”, says Marek Niechciał, President of UOKiK.
Meanwhile, iCredit grants loans without waiting for surety. In addition, the company does not count the contractual penalty in non-interest loan costs, which makes it difficult for customers to assess the loan terms and compare them with other offers on the market. UOKiK imposed a fine amounting in total to more than PLN 902,000 on iCredit for violating consumer rights.
