The average person, when entering into a loan agreement with a bank, signs everything that will be brought to his nose by a credit counselor. It is not uncommon for her not to read the contract she signs or does, but simply does not understand her. On the other hand, banks enjoy so much trust in society that most borrowers find it unnecessary to read the contract.
They are firmly convinced that the bank will not deceive them, and yet financial institutions, like all other enterprises, are profit-oriented and care mainly about their interests. For this reason, it is often the case that bank agreements contain provisions to secure institutions that are not entirely lawful, social norms or good practices. These provisions are abusive clauses.
The loan agreement
The loan agreement is prepared by the bank in the form of the so-called standard contract. It is a ready agreement created by the bank without negotiating the content of the subscription with the bank’s customer. In addition, in the overwhelming number of cases where a client objects to a contract, advisers say that contracts with banks cannot be changed. Therefore, the potential borrower has the option of either incurring the liability in the form presented by the bank or resigning from the loan. The bank’s claims above are obviously not true – any agreement can and should be negotiated.
The bank operates for a profit and is primarily trying to secure its own interests. For this reason, if abusive clauses appear in the contract, your reservations should be reported before entering into an obligation. Later, only the Consumer Ombudsman or the court will remain.
What exactly are abusive clauses?
Abusive clauses, or otherwise prohibited clauses, are provisions of standard contracts (including credit agreements concluded with financial institutions) that shape the rights and obligations of the consumer in a manner inconsistent with generally applicable law. Whether these clauses can be considered illegal is determined by whether they shape the rights and obligations of the consumer in a manner contrary to decency and to strengthen the interests of one of the parties, in our case a credit institution.
It should be remembered that the institution of abusive clauses applies only to contracts concluded between legal and natural persons, i.e. consumers. In accordance with art. 221 of the Civil Code (hereinafter referred to as Civil Code), a consumer is a natural person who performs a legal act not related directly to his business or professional activity.
In turn, in the light of art. 431 of the Civil Code, an entrepreneur is a natural person, a legal person or an organizational unit without legal personality, to whom a separate act grants legal capacity – pursuing economic activity on their own behalf. Entrepreneurs are also considered partners in a civil law partnership in the scope of their business activities.
In order for a given provision to be considered an abusive clause, it must shape rights and obligations in a manner contrary to decency and grossly violate the interests of the consumer in accordance with the above. However, this is not enough, it is also necessary to have two premises in the form:
no individual agreement with the consumer – in accordance with art. 3851 3 of the Civil Code, an illegal entry is one on whose content the consumer had no real influence;
may not concern the determination of the parties’ main benefits.
How do you know if a clause is not allowed?
Although the contractual provision may seem suspicious to negate it, you must be sure that it is not allowed. To obtain such confirmation, it must first be combined with the provisions of the Civil Code. Article 3853 of the Civil Code regulates the catalog of features of abusive clauses allowing to assess whether a given entry is not allowed. It should be emphasized that the above catalog is an open catalog and the items contained therein are only examples. In fact, there are many more illegal entries.
The second step that the potential borrower should take is to compare credit records with items in the register of prohibited contractual clauses made available on the Office of Competition and Consumer Protection’s website, as well as to read the Good Lender reports published on this website regarding contract templates used by individual industries (e.g. tourist, educational, banking or development) and justifications of judgments of the Court of Competition and Consumer Protection.
A contractual provision recognized by the court as an abusive clause may not be used by other entrepreneurs in the future. This means that if an unclear provision in the contract is also in the register of prohibited contractual clauses, it can be assumed in advance that it is defective and the borrower is not obligated, and in the event of a dispute, the financial institution will not be able to enforce the provisions governed in such a clause from the borrower.
It is worth remembering that the Civil Code in art. 385 § 2 provides that the template contract should be formulated clearly and comprehensibly. If it contains ambiguous provisions, they are translated in favor of the consumer. This provision permits situations in which, despite signing a loan agreement, the court considers the provision vague and interprets it in favor of the borrower.
What if the bank does not agree to remove the abusive clause from the contract?
If, despite the consumer’s reservations, the financial institution does not want to withdraw from the unclear contractual provision, the borrower has the right to go to court with such a contract. The contract verification process varies depending on the status of the consumer.
The first mode is the so-called abstract mode and applies to consumers who have not yet decided to sign a loan agreement. It is regulated by the Act on competition and consumer protection. According to it, the system of controlling standard contracts is exercised in an administrative mode by the President of the Office of Competition and Consumer Protection.
The abstract mode is a flexible procedure that does not require the applicant to conclude a credit agreement with a financial institution. It is enough that the consumer encounters a questionable contractual clause, e.g. when browsing the banks’ offers or familiarizing themselves with the regulations or the general terms and conditions of these institutions.
A final decision on declaring a standard contract provision unlawful has an effect on the entrepreneur (i.e. a financial institution) who has been found to use an unlawful contractual provision and on all consumers who have concluded a contract with him based on the model indicated in the decision. It is important that this procedure is initiated only ex officio (also at the consumer’s request), and the party to the proceedings is only the entity against which it was initiated.
The second mode applies to consumers who have already concluded contracts with banks. This is called incident control mode. In case of doubts as to the correctness of given contractual provisions, the consumer has the right to file a claim for recognition of the provisions of a specific contract as abusive clauses.
The claim is directed to the Court of Competition and Consumer Protection (it is a court of first instance, it is a separate organizational unit of the District Court in Warsaw). If the court finds the entry prohibited, then it considers it as an abusive clause and repeals it (“deleted from the contract”). One should also be aware that in the light of art. 3851 § 1 of the Civil Code, an illegal contractual clause does not bind the parties to the contract, which means that only the clause considered illegal is revoked, and the contract concluded with the bank remains valid. An illegal entry therefore does not abolish (does not invalidate) the entire contract, but only a specific unclear entry.
What threatens financial institutions for introducing abusive clauses into contractual patterns?
At present, financial institutions need not be afraid of severe penalties for their often deliberate behavior prejudicial to consumer interests. Hence, these entities often conduct such procedures for months and even years (see franc scandal) – having a staff of lawyers. The consumer often loses his position during the process.
At present, financial institutions are at risk for using abusive clauses in financial contracts:
deprivation of binding force of contractual provisions applied by banks;
subjecting contractual templates to the control under the abstract procedure or judicial review under the individual procedure;
recognition of contractual provisions as a practice infringing collective consumer interests.
The last two cases threaten with an additional sanction in the form of financial penalties and the need to pay the costs of the trial.
Abusive clauses in loan agreements – summary
As you can see, we can fall victim even in an institution that enjoys high social trust and the process of its activity is defined in dozens of legal acts. If you intend to enter into a commitment with a credit institution, regardless of whether it is a loan or credit, you should carefully read the contract, the bank’s regulations and the GTC.
If the wording used in the credit documentation is incomprehensible, do not be ashamed, but ask and ask for clarification. It’s also a good idea to get help from an independent credit / financial advisor. He receives a commission from the bank chosen by the borrowers, so there is no fear that he will act only in the interest of his or the financial institution.