News and developments
Oversight of lending institutions by the Financial Supervision Authority (KNF)
On one hand, the Anti-usury Act imposes a range of new obligations on lending institutions, while on the other it gives the KNF tough oversight powers that extend far beyond the current power to keep a register of lending institutions and formally examine eligibility for registration. This article will focus on the major amendments to the Consumer Credit Act[2] (UKK) that will soon affect or already affect the Polish lending sector, taking into consideration as well the recently adopted new EU Consumer Credit Directive[3] (CCD2).
New corporate and share capital requirements for lending institutions
The Anti-usury Act introduced crucial changes with implications for lending institutions’ business activities, in particular the permitted organizational and legal forms and the value of share capital.
Under the laws, lending institutions may only operate in the form of a joint-stock company or limited liability company but the new development is that a supervisory board is now compulsory in the case of the latter. There were indications while the legislative work was in progress that the form of a capital company was to be the optimal solution for business activity of lending institutions. This conclusion was reached in view of the managing bodies existing within it, the distinctly separate management and monitoring roles allocated to these bodies, and the adopted corporate responsibility mechanism. There are some concerns in this regard however, considering that lawmakers did not include the form of a simple joint-stock company on the list of permitted forms of lending activity.
Under the new rules, even in the case of a limited liability company, management board and supervisory board members and commercial proxies of a lending institution cannot be persons with legally binding convictions for offences relating to forgery of a document, asset theft, economic crime, money and securities trading, and fiscal offences. The KNF will monitor compliance with this requirement during the registration process. Thus the applicant will be required to submit a certificate issued by the National Criminal Register stating that the individuals concerned have no prior convictions. It is important to note that there is no rule under the UKK that the requirement of no prior convictions also applies to shareholders in a lending institution.
Meanwhile, the minimum share capital required for a lending institution has been increased from PLN 200 000 to PLN 1 m. For the lenders existing on the market, this new rule might mean conducting the procedure to increase share capital.
As lending institutions will now be subject to KNF oversight, in addition they have to conduct an analysis of compliance with further requirements, not provided for explicitly in the UKK, applicable to firms subject to KNF public law oversight. This concerns matters such as requirements under the KNF Corporate Governance Rules (ZŁK) issued in July 2014, laying down rules on organization, internal monitoring, crucial systems and internal functions, and also the statutory bodies and collaboration between them, that entities subject to regulation must follow.
Reporting obligations
KNF oversight will also mean obligations such as filing quarterly and annual reports on consumer loan activities with the KNF (art. 59dg UKK). The information required in these reports includes:
Author: Michał Synowiec, PhD, Attorney-at-law and Hubert Łączkowski
Footnotes [1] Act of 6 October 2022 amending the Anti-usury Act (Journal of Laws of 2022, item 2339). [2] Consumer Credit Act of 12 May 2011 (Journal of Laws of 2023, item 1028 as amended). [3] Directive (EU) 2023/2225 of the European Parliament and of the Council of 18 October 2023 on credit agreements for consumers and repealing Directive 2008/48/EC. [4] https://legislacja.rcl.gov.pl/projekt/12375450/katalog/12996739#12996739 [accessed: 09.11.2023].
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- numbers with regard to granted consumer credit, including credit with deferred repayment,
- the value of the credit,
- structure in terms of time line and currency,
- instances of payment default.
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- to impose an administrative fine on the lending institution’s management board member directly responsible for the determined wrongdoing of up to PLN 150 000;
- to impose an administrative fine on the lending institution of up to PLN 15 000 000;
- to request that the competent body of the lending institution recall the management board member responsible for the determined wrongdoing, or suspend that person until the request for them to be recalled has been reviewed;
- to strike the firm from the lending institution register, and from the register of credit intermediaries, as applicable.
Author: Michał Synowiec, PhD, Attorney-at-law and Hubert Łączkowski
Footnotes [1] Act of 6 October 2022 amending the Anti-usury Act (Journal of Laws of 2022, item 2339). [2] Consumer Credit Act of 12 May 2011 (Journal of Laws of 2023, item 1028 as amended). [3] Directive (EU) 2023/2225 of the European Parliament and of the Council of 18 October 2023 on credit agreements for consumers and repealing Directive 2008/48/EC. [4] https://legislacja.rcl.gov.pl/projekt/12375450/katalog/12996739#12996739 [accessed: 09.11.2023].