UOKiK Under the Microscope —Penalties for the Financial Sector

An Expensive Loan with a Bundle of Services. Nearly 4 million PLN in Fines for Circumventing Loan Cost Limits

The President of the Office of Competition and Consumer Protection (UOKiK) imposed a fine of nearly 4 million PLN on a loan company for engaging in practices that violated the collective interests of consumers. The company made the granting of loans contingent on the purchase of expensive additional services, such as medical packages, language courses, and legal and technical support services. The costs of these services were automatically added to the loan amount, which resulted in exceeding the statutory limits on non-interest loan costs.

In the third part of our series on penalties imposed by the President of the Office of Competition and Consumer Protection (UOKiK) on businesses in the financial sector, we examine the practice of offering loans bundled with expensive additional service packages. This time, the Office’s objections concerned not only the manner in which financial products were offered but also the mechanism that allowed for circumventing regulations limiting the maximum costs of consumer credit.

A loan only with an additional service package? 🤔

According to the findings of the Office of Competition and Consumer Protection (UOKiK), consumers who wanted to obtain a loan or take advantage of specific financing terms were required to purchase additional services at the same time. These included, among other things, medical subscriptions, online language courses, and legal or IT technical support packages, with prices ranging from several hundred to even several thousand zlotys.

Although these services were presented as voluntary, in practice, purchasing them was a condition for obtaining financing under certain terms. Consumers therefore bore the costs of services they often did not need and did not use, solely in order to obtain a loan.

Furthermore, the business owner promoted offers on his website that included additional packages as more advantageous than a standard loan. The option without additional services provided for a lower loan amount and a higher monthly payment, which may have led consumers to believe that choosing a loan with a package was more cost-effective.

Service fees added to the loan amount 💰

The Chairman of the Office of Competition and Consumer Protection (UOKiK) raised specific concerns about the way additional services were financed. Their costs were automatically added to the loan amount, which artificially increased the total loan amount.

The scale of the problem is illustrated by one of the consumer complaints cited by UOKiK. A consumer who entered into a loan agreement for 5,000 PLN learned, after withdrawing from the agreement, that the principal amount was 7,700 PLN. The difference of 2,700 zł resulted from the addition of the cost of a medical package, which—as the consumer pointed out—he had not consented to purchase.

The President of the Office of Competition and Consumer Protection (UOKiK) determined that this mechanism led to circumvention of the provisions of the Consumer Credit Act, in particular the regulations limiting the amount of non-interest credit costs.In fact, the costs of additional services related to the granting of financing were included in the loan amount rather than being treated as costs associated with the loan.

Underreported APR and misleading cost disclosures 📈

The irregularities also concerned the way in which financing terms were presented to consumers.

The business owner included the fees for additional services, which were charged as part of the loan, in the total loan amount. As a result, consumers were given an inaccurate picture of the relationship between the actual amount of financing and the costs associated with obtaining it.

This also led to a gross understatement of the Annual Percentage Rate (APR)presented in the contracts, thereby making it difficult for consumers to properly assess the actual costs of the loan.

A fine of nearly 4 million PLN—what lessons can be drawn from this decision? 🔍

For engaging in the disputed practices, the President of the Office of Competition and Consumer Protection (UOKiK) imposed a fine totaling 3,871,000 PLN on the business. The decision is not final and may be appealed in court.

Once the decision becomes final, the business will also be required to publish information about the ruling on its website and Facebook page. The notices must remain visible to consumers for three months.

This case demonstrates that offering additional services alongside financial products cannot be used to circumvent statutory limits on credit costs.It is particularly important to correctly classify the costs of services related to the granting of financing and to accurately disclose to consumers the total amount of the loan, its costs, and the APR.

In the next and final part of this series, we will examine the decision regarding tied loans and the consumer rights arising from such agreements.