Mortgage Loans and Protection of Consumers

Published 13 September 2017

A new Act on Mortgage Loans (“the Mortgage Loan Act”)  has been recently introduced in Poland and this Act regulates precise issues regarding  mortgage loan contracts.  The aim of the new law is in particular  designated to protect consumers who decided to sign mortgage  agreements and to establish a balance between the interests of lenders and their clients. Under the Mortgage Loan Act, the possibility to grant loans in foreign currencies, such as  Euros or Swiss Francs, has been extremely limited as in the past many Poles were given mortgages  in Swiss Francs and they had to suffer the consequences of such a choice being  burdened with risk of change and jumping of the exchange rate  between Polish and Swiss currencies. To avoid this negative impact on mortgages, the Polish legislator forbids the conclusion of a mortgage loan agreement for buying a property  subject to a currency which differs from the currency in which the lender receives his/her monthly salary. In addition, the mortgage can only be granted in the currency in which the lender, as a consumer, gains the majority of his/her earnings and has  his/her savings. In addition, in accordance with the Mortgage Loan Act, only banks and credit institutions being under supervision of the KNF (Financing Supervision Commission in Poland) will be entitled to provide loan to consumers.  This activity will be forbidden by the so – called “lending companies”. Furthermore, the advice and intermediation within the  granting of mortgages  can only be provided by certified agents who must pass a state exam or have a tertiary education in law or economics. Finally, the new law also foresees many restrictions as to the advertising  of mortgages among consumers. Such advertising materials should be understandable, honest and include any relevant information for the future mortgage  agreement such as the amount, kind and way of settlement of effective interest rates, providing the entire loan amount, impact of the changes of the rate of exchange for the entire amount of the mortgage  to be repaid in the  case of a mortgage  in a foreign currency. It remains to be seen whether this additional legislation will be sufficient to protect consumer rights towards financial institutions offering mortgages.