Taking out a loan usually involves the necessity of paying various types of commissions, preparation fees, etc. non-interest costs that can reach even tens of thousands of dollars. Not everyone knows that by repaying the loan earlier, we have the right to demand a refund of part of the costs.
With low-value cash loans, non-interest costs may not make a special impression on the borrower, but for example with mortgage loans, the additional fees reach a very high level. These amounts go to tens of thousands of dollars. Banks can charge 70,000 USD or even more commissions.
This is, of course, the way lending institutions pay for low-interest rates
The latter cannot be high, because the market is very competitive, and aggressive marketing of banks strongly emphasizes and promotes attractive interest rates.
Thus, banks are trying to compensate for losses caused by low-interest rates on loans and fees. Unfortunately, then they are not willing to return even part of this money when the borrower repays his liability earlier. However, it turns out that they should.
Many borrowers do not even know that they are entitled to a refund of part of non-interest costs with early repayment of the loan. Banks are eager to avoid this topic and do not pay back any fees previously charged for various activities or services (e.g. preparation fees). It turns out that from October 11, 2015, to the end of April 2016, the Financial Ombudsman received more than 500 complaints regarding consumer loans, of which over 100 were related to improper cost settlement in the event of early loan repayment.
In 2017, there were already 279 complaints
Today, it turns out that these complaints were not at all unfounded. To explain the essence of the problem, you need to go back to the provisions of the Consumer Credit Act. We are particularly interested in the following three articles:
The total cost of credit – all costs that the consumer is obliged to incur in connection with the credit agreement, in particular:
- (a) interest, fees, commissions, taxes and margins, if known to the creditor, and
- b) costs of additional services, if they are necessary to obtain a loan
– except for the costs of notary fees incurred by the consumer;
The consumer has the right to repay all or part of the loan at any time before the date specified in the contract.
- If the entire loan is repaid before the deadline specified in the contract, the total cost of the loan is reduced by those costs that relate to the period by which the duration of the contract has been shortened, even if the consumer incurred them before that repayment.
- In the event of repayment of part of the loan before the date specified in the contract, paragraph 1 shall apply accordingly.
The interpretation of art. 49 paragraph 1 made by the Financial Ombudsman and the President of UOKiK. According to her, the said article of the Consumer Credit Act should be understood as follows:
- In the event of early repayment of a consumer loan, all possible costs of such a loan will be reduced, irrespective of their nature and regardless of when these costs were actually borne by the borrower.
- This reduction is proportional, i.e. it relates to the period from the date of actual repayment of the loan to the date of final repayment specified in the contract.
How to recover costs?
It would seem that the above interpretation solves the problem of borrowers paying back before their due date, but it turns out that this is not entirely the case. Although some banks are already changing the regulations in favor of customers, many are still not willing to pay non-interest costs. They refer to the position of Bank Consumer Arbitration, operating at the Polish Bank Association, which states that the commission is a fee that covers the costs of preparing and servicing the contract. However, a commission of tens of thousands of dollars can hardly be considered a cost incurred by the bank for servicing the loan.
If the bank does not want to reimburse part of the costs, it remains to force it to do so in court. It is worth emphasizing that the courts are usually on the side of borrowers. An example is the judgment of the District Court in Łódź of 22 June 2017, which awarded a proportional part of the commission charged due to early repayment of the loan, in the justification by writing, among others:
“Instead of collecting interest, the lenders could construct credit agreements in such a way that only to a small extent or not at all they would receive interest or commission on account of the loan granted, i.e. remuneration on account of the capital transferred to the borrower, whereas the remuneration would be hidden under the so-called preparatory, administrative fees, etc. This would circumvent and violate the ratio legis of Art. 49 in connection with art. 5 point 6 of the Act “(reference number III Ca 10/17).
If you repaid the loan in advance and you do not know how to recover the commission, you do not have to struggle with the bank yourself. All you have to do is contact us now and our lawyers will take care of your case and help you get the money back from the financial institution.