Draft of a new Polish anti-usury bill
The Ministry of Justice published a draft of a new anti-usury bill, lowering the limits on loan costs other than interest. According to the bill, the fees and commissions will not be permitted to exceed 10 percent of the loan amount, which will be able to increase by 10 percent of the amount for every repayment year. Total cost of loan processing will not be permitted to be higher than 75 percent of the borrowed amount (not including interest). Additionally, the bill introduces severe penalties for breaching the regulations – even 5 years of imprisonment.
The new limitations regarding cost of credit other than interest were introduced just a few months ago, this March. The Ministry of Justice prepared a draft of a bill predicting further tightening of the terms of lending money to consumers. Although the regulation, according to its justification, is to, most of all, protect the clients who fall victim to usurers, its effects may affect bank clients as well. Lending companies may be particularly worried, as for them the bill coming into effect in the proposed shape may mean the end of their business.
According to the included justification of the project, „the project aims to take comprehensive and coordinated actions, both in the field of criminal law and through intervention into civil law relationships, to eliminate the pathology of offering usury loans”.
The definition of usury, according to the Ministry of Finance, has been rather defective. To prove such infringement, you had to for example indicate that the forced situation of the person who was to receive the benefit was taken advantage of and that the offender acted intentionally to gain profits. Currently, demanding excessive payment from the consumer is to come under penalty of 3 months to 5 years of imprisonment.
According to the project, the cost of providing money benefit that is the sum of interest, fees and other contractual elements will not be allowed to exceed the equivalent of maximum interest and maximum late interest.
The project of the Ministry of Justice is not limited to amendments to the Criminal Code. It also provides a series of changes to other acts regarding lending by physical persons as well as institutions.
The sum of security of claims related to granting money benefit (e.g. a loan) is also to be limited – up to the equivalent of the benefit amount increased by maximum interest calculated for the period stipulated in an agreement and prolonged by 6 months. Satisfying the claim from security above the set limit and causing damage to the borrower over 10 thousand PLN will incur a penalty of 3 months to 5 years of imprisonment.
The new version of anti-usury regulations introduces also very important changes to the act on consumer credit. The Ministry proposes lowering all ratios settling the maximum amount of fees and commissions.
Within the present threshold, the ratio is set as no more than 25 percent of the credit amount plus 30 percent of the amount for every year of the agreement. The total sum of costs cannot in turn exceed 100 percent of the borrowed amount.
The bill proposes exchanging these ratios with lowered numbers that would be set at no more than 10 percent of the credit plus 10 percent of the amount of every year of the agreement. The total sum of costs would in turn be limited to 75 percent of the borrowed amount.
Cutting the limits down could noticeably change the situation on the consumption credit market. Within the new limits, there would no room for e.g. some bank offers of cash loans including commissions reaching as much as 30 percent. In the case of loan companies offering short-term solutions, the parameters of almost all products would have to change. Due to the above, the new bill can be very problematic to loan companies.