The Anti-usury Act, which came into force on February 20 2006 aims to create an additional protection for borrowers against exorbitant banking charges and usurious interest rates and to reduce and limit activity of various financial institutions offering high interest loans with more than 100% interest rate per annum. The new provisions concern loans worth up to €20,000.
Under the new provisions, interest on loans may not exceed, annually, four times the advance against securities announced by the National Bank of Poland. At the moment an interest rate cannot exceed 22%. The total amount of all charges and commissions connected with the agreement must not exceed 5% of the loan granted. These limitations apply if the loan agreement is governed by foreign law. Those who impose interests higher than the allowed maximum will face criminal sanctions in form of a fine, restriction of liberty or imprisonment for up to two years.
The Anti-usury Act also imposes information duties on creditors. Businesses granting loans must provide consumers with brief information on additional costs in case of default, in particular regarding the interest rate for overdue amounts and the conditions of its modification, costs of collection letters, calls for payments, court costs and cost of enforcement.
A survey of the new Act's effects in its first year shows that the new regulations did not cause any real decrease of interest, which is now hidden in various supplementary charges. The only change imposed by the amendment has been a reduction of interest connected with credit card accounts. Various financial institutions avoided the upper limit of interest by introducing new, compulsory supplementary charges, which are not regulated by the Anti-usury Act. Additional expensive credit insurance and penalty interests on late payments became the most frequently used solution. Creditors earn as much as they did before and borrowers have lost the ability to easily calculate the real costs of a loan to compare competing offers.
By Piotr Bielarczyk and Maciej Gawronski
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