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Early repayment of consumer credit, and reimbursement of some fees and commissions

In accordance with the position of the Financial Ombudsman and the President of the Office of Competition and Consumer Protection, early repayment should result in the return of fees and commissions collected by the bank. It is worth remembering that by settling your commitment ahead of schedule.

Banks are resorting to sophisticated ways to win the attention of potential customers. An example of such action may be cash loans with zero interest . At first glance, the solution is perfect, but after a closer analysis, it turns out that it has a high, prepaid, administrative fee. Does this mean, therefore, that premature repayment of consumer credit is associated with the total loss of commission paid at the start?


Joint position of the Financial Ombudsman and the President of iOK


In the discussed scope, both authorities agree – the early repayment of the loan should involve the reimbursement of a proportional part of the costs incurred as part of the preparatory commission or other administrative fees. This position was based on the interpretation of art. 49 of the Consumer Credit Act, the content of which is as follows:

Art. 49. 1.In the case of repayment of the whole loan before the deadline specified in the contract, the total cost of the loan shall be reduced by those costs which concern the period by which the duration of the contract was shortened, even if the consumer incurred it before this repayment.

In line with the adopted view, the above provision covers the total cost of the loan , which in accordance with the regulations consists of: “interest, fees, commissions, taxes and margins, if known to the lender and costs of additional services in the event that their incurring is necessary to obtain a loan – with the exception of the costs of notarial fees borne by the consumer. ‘


Repayment of loan before maturity – case study

Repayment of loan before maturity - case study

To illustrate the situation that fits into this type of scenario, we will use a simple example. The client took out a cash loan in the amount of $ 30,000 for a period of 12 months. The interest rate on the loan is 8%, and the commission for its granting is 15% ($ 4,500). Each installment also includes a premium for loan insurance . As a result of a sudden improvement in the borrower’s financial situation, the liability was repaid 6 months after the date of signing the contract.

According to the interpretation of the provisions, the customer who “closes” the loan will no longer have to pay the interest expense and pay the next insurance premiums, and should receive a pro rata refund of the commission commissioned in advance. Due to the fact that the loan was repaid in the middle of the contractual period, the bank should return $ 2 250. Unfortunately, it still happens that financial institutions are not eager to return some of the problematic commission.


An important tip for financial market participants

Borrowers planning an early repayment of a consumer loan must remember that not all costs related to incurring a liability will be reimbursed. This group includes, among others, notary fees or fees associated with the establishment of appropriate safeguards. However, the joint position of the Financial Ombudsman and the President of the OCCP is a clear signal, whose side the offices face in the face of a potential dispute on the client-lender’s line. It is also worth remembering that:

The Financial Ombudsman and the President of iOK do not have the competence to interpret binding provisions of universally binding law, hence the presented position should be interpreted as an important interpretive guide for financial market participants.