All the inspected banks used contact terms which were unfavourable for customers - revealed the latest analysis of the Office of Competition and Consumer Protection. More than 300 standard form mortgage loan agreements were inspected. The majority of the banks have already undertaken to change their conduct

In 2007 banks in Poland sanctioned mortgage loans in the total amount of nearly PLN 60 billion, i.e. almost 46% more than in the previous year. The average amount of a loan was PLN 182 thousand. Signing a loan agreement to finance the purchase of a house or apartment is one of the most important financial decisions in one’s life, that is why protecting consumers signing such agreements is especially important.

Consequently, the Office of Competition and Consumer Protection carried out an inspection of mortgage loans. It covered more than 300 standard form agreements, rules and regulation, fees and charges tables and loan insurance agreements. The exercise was one of the biggest of this type conducted by the Office of Competition and Consumer Protection so far. 19 banks were inspected: BPH, Millennium, PEKAO, Bank Pocztowy, Bank Ochrony Środowiska, Bank Zachodni WBK, BRE Bank, Deutsche Bank PBC, Fortis Bank, GE Money Bank, Getin Bank, ING Bank Śląski, Invest Bank, Kredyt Bank, Lukas Bank, Nordea Bank Polska, Nykredit, PKO Bank Polski, Santander Consumer Bank. The main purpose of the inspection was to find any irregularities and to eliminate terms which are unfavourable for consumers.

Infringements have been found in each of the inspected banks - the Office has challenged more than 40 clauses. As mortgages are taken for many years - in some cases, for almost the entire life of the consumer - the consequences of an unfavourable agreement may be felt long after the transaction with the bank is made.

The major irregularities found by the Office of Competition and Consumer Protection were the following:

• Imprecise criteria of setting the fees for servicing the loan. Among the contract terms relating to fees and charges which raised the Office’s objections there were clauses determining only the minimum fees and charges that the bank may charge the client during the contract period. If the maximum fee is not determined, it is possible for the bank to set it at its discretion, which makes the consumer unable to estimate the final cost of the loan. In the Office’s opinion, the contract should specify the criteria which the bank takes into account when determining the fee for each individual operation;
• Bank’s unlimited right to carry out inspections of the property at the client’s cost. Other objectionable terms found by UOKiK in the standard form agreements authorised banks to carry out inspections of the mortgaged property or demanded that the consumer provide an appraisal of the property - in both cases at the borrower’s cost. However, no potential circumstances justifying such operations were indicated. Taking into account the cost of the inspection - PLN 150 on average - as well as the lack of clear indication of when and in what circumstances it may be necessary, clauses of this sort can considerably increase the final cost of the loan;
• Too much discretion granted to the bank. The Office objected to clauses enabling banks to change the currency and interest rate in the event of a change of the socio-political or economic situation of the country in whose currency the loan was taken. In the Office’s opinion, such determination of the grounds for changing the currency is too wide, making the bank able to interpret a “change of socio-political situation” at its discretion. Under the existing law, an agreement’s wording should be clear and, first and foremost, understandable: any unclear clauses should be interpreted to the consumer’s benefit. The Office also objected to clauses authorising the bank to reduce the amount of loan or to terminate the agreement in the event of the borrower’s defaulting on his/her liabilities towards other entities, e.g. tax offices. In UOKiK’s opinion, performance of liabilities which are not related to the lending bank and which do not put the performance of the mortgage loan agreement at risk, may not have any influence upon the terms and conditions of the mortgage loan;
• Too big burden imposed on consumers. Some agreements required consumers to seek the bank’s consent before taking another loan, credit or standing surety to another person. This would not be objectionable if the bank had specified an amount of debt above which the customer would have to notify the bank, and another, higher limit above which the bank’s consent would be required. Signing an agreement containing only very general wording, consumers had to agree that each time they e.g. buy a TV in instalments, they will be obliged to obtain the consent of the bank which granted them the multi-year mortgage loan;
• Making the mortgage loan subject to the customer’s opening an account with the lending bank. Under the existing regulations, making the conclusion and performance of a contract subject to buying another product - in this case a bank account - is illegal (the clause was entered into the Register of Abusive Clauses, see: www.uokik.gov.pl). It should however, be noted that most of the banks have already introduced changes to their agreements to the effect that customers are no longer obliged to have a full-charge current account with the lending bank, and loan payments may be paid into a special, free-of-charge technical account used only to service the loan.

UOKiK had also numerous objections as regards the loan insurance agreements that banks sign with insurance companies. In such a case, consumers are frequently charged with the policy costs, in spite of the fact that they are neither a party to the agreement, nor its beneficiary. In practice, this means that the borrower pays premiums due under an agreement which secures only the bank. Furthermore, if the insurer pays out compensation to the bank, the consumer bears recourse liability. As a result, the risk associated with the bank’s operations is shifted on to the borrowers. In UOKiK’s opinion, there are no legal grounds justifying such an approach. The same applies to requiring that the consumer issue a blank promissory note to the insurance company as a security for the loan. In the Office’s opinion, if the borrower is not a party to the agreement with the insurance company, the insurer has no legal grounds to demand any security for the loan or other documents from him/her.

Currently, the Office of Competition and Consumer Protection is taking steps to remove the irregularities which were found. It should be emphasised that the majority of the banks concerned declared their willingness to cooperate with UOKiK and voluntarily rid their contracts of the irregularities. The President of the Office is planning to launch proceedings against the remaining banks concerning infringement of collective consumer interests. UOKiK is also intending to bring actions to the Court of Competition and Consumer Protection which has the authority to recognise contract clauses as abusive. More information on the banks’ practices, the objectionable clauses and irregularities may be found in the Report.

At the same time, the Office of Competition and Consumer Protection is reminding consumers that in the case of any legal problems related to a mortgage loan agreement, its servicing or termination, they may seek help from local consumer ombudsmen or non-governmental consumer organisations, i.e. the Polish Consumer Federation and the Association of Polish Consumers. Consumers can also get free advice by calling 0 800 800 008.

Additional information:
Małgorzata Cieloch, Spokesperson for UOKiK
Pl. Powstańców Warszawy 1, 00-950 Warszawa
Tel. (+48 22) 827 28 92, 55 60 106, 55 60 430
faks (+48 22) 826 11 86
E-mail [SCODE]bWNpZWxvY2hAdW9raWsuZ292LnBs[ECODE]