What is the sanction of a free loan?

In the era of growing interest in consumer loans, many borrowers are unaware that financial institutions sometimes violate applicable regulations. In such cases, consumers can take advantage of the protective mechanism provided by law – the sanction of a free loan. In this article, I explain what this solution is and what benefits it can bring to borrowers.

What is the sanction of a free loan and how does it work?

The sanction of a free loan (SKD) is regulated by the Act of May 12, 2011, on consumer credit. According to its content, in the event of a breach by the lender of obligations arising from legal provisions, the consumer has the right to a refund of the loan without interest and other costs. It is worth emphasizing that according to the ruling of the Supreme Court of June 20, 2006 (III SK 7/06, OSNP 2007, no. 13-14, item 207), mandatory provisions of the consumer credit agreement must be clearly defined and cannot refer to bank regulations.

Free loan? Check if you can take advantage of it!

To benefit from the sanction of a free loan, certain conditions must be met:

1. consumer status – the sanction is granted only to individuals who have taken out a loan for purposes unrelated to business activities.

2. time of contract conclusion – it includes loans granted after December 18, 2011 (for mortgage loans after July 22, 2017).

3. loan amount – the value of the obligation cannot exceed 255,550.00 PLN or its equivalent in foreign currency.

If the above conditions are met, one can proceed to analyze the loan agreement. It is necessary to verify whether there are formal errors or prohibited clauses in the agreement.

The most common bank errors:

1. incorrectly calculated APRC – incorrect indication of the actual annual percentage rate;

2. incomplete information about loan costs – lack of clear presentation of the total cost of the obligation;

3. lack of written form of the agreement – the loan should be concluded in a form that allows for unambiguous determination of its terms;

4. lack of precise determination of the repayment date – imprecise provisions in the agreement may result in its invalidity.

If your agreement contains the above irregularities, you have a chance to benefit from the sanction of a free loan.

Preparing a statement and a request to the bank

Before submitting a statement, it is advisable to gather the necessary documents, such as a copy of the loan agreement, loan repayment history, evidence of any additional fees (e.g., bank statements), and previous correspondence with the bank. This will facilitate further pursuit of your rights in case of refusal to acknowledge the SKD. The statement should be made in writing and delivered in a way that allows for confirmation of its receipt by the addressee, e.g., via registered mail, in person at the bank branch, or electronically – if the bank allows such a form of communication. The consumer is obliged to submit the statement within one year from the date of execution of the agreement.

In court rulings, there is no uniform position regarding the interpretation of the term “date of execution of the agreement.” Three possible ways of understanding it are indicated:

1. the day the funds are disbursed by the lender,

2. the day the borrower settles the last installment,

3. the day on which both parties fully fulfilled their obligations arising from the agreement.

The prevailing interpretation is that the “date of execution of the agreement” is the day on which all obligations of the parties arising from both the provisions of the consumer credit agreement and legal provisions have been duly fulfilled. This was stated, for example, by the District Court in Kielce in the judgment of March 14, 2023, case file: II Ca 98/23.

What to do in case of refusal?

If the bank does not acknowledge the SKD, you can:

1. file a complaint (the bank has 30 days to respond);

2. file a complaint with the Financial Ombudsman;

3. sue the bank.

Benefits for the borrower resulting from SKD

1. Refund of all interest and loan costs.

2. Reduction of the monthly installment.

3. No risk of termination of the agreement by the lender.

4. No negative impact on the credit history.

The sanction of a free loan is an effective tool for protecting consumers against unfair practices of lenders.

If you have a consumer loan and have doubts about its terms, contact the Law Firm. We will analyze your agreement for free and indicate further possibilities for action.