Sanction Free Credit (SKD)

What is the sanction of free credit?

The sanction of free credit is a consumer protection tool arising from the Article 45 of the Law on Consumer Credit . It allows the borrower to return only the borrowed principal, without interest, commissions and other fees, if the bank or financial institution has violated the regulations.
This is not a promotion, but a legal consequence of mistakes on the part of the lender. The mechanism was introduced based on Directive 2008/48/EC to increase the transparency of credit contracts and protect consumers from unfair practices.

What loans qualify for free credit sanctions?

1. For a loan to be sanctioned as free credit, it must meet certain criteria:
   Loan amount – the sanction applies to loans whose value does not exceed PLN 255,550 or the equivalent of this amount in another currency. Exceeding this amount excludes the possibility of taking advantage of the sanction.
2. Date of conclusion of the agreement – the sanction of free credit applies only to credit agreements concluded after December 18, 2011. Contracts concluded before this date are not subject to this legal institution.
3. Borrower status – the sanction is available only to consumers, i.e., individuals acting for non-business or professional purposes. Entrepreneurs and legal entities are not eligible for this form of protection.
4. Regular repayment of installments – the borrower must show timely repayment of installments according to the schedule provided for in the loan agreement. The sanction of free credit does not apply in the case of gross violations of the contract on the part of the borrower, such as prolonged delays in repayment or complete cessation of payment. (It is worth noting, however, that minor payment delays, such as being a few days late in paying an installment, do not exclude the possibility of taking advantage of the sanction. In such a situation, the penalty interest charged by the bank for the delay is not recoverable under the sanction of free credit, but it does not deprive the borrower of the right to pursue other claims related to the lender’s breach of disclosure obligations).
5. Statute of limitations – the sanction of free credit can be used by consumers whose credit agreement is still active (i.e. is in the process of repayment) and those for whom no more than 12 months have passed since the date of full repayment of the loan or the last installment. After the expiration of this period, the claim is time-barred.
6. Lack of mortgage collateral – the sanction of free credit does not extend to loans secured by mortgages, except for mortgages granted until July 22, 2017. For these loans, however, it is worth noting the removal of the WIBOR reference index from the loan agreement, which may be a more favorable solution for the borrower.

If you meet these conditions, you can recover wrongfully incurred costs. Contact us – Dowlegal will help you assert your rights!

Types of contracts sanctioned by free credit

Only the following types of contracts may be subject to the sanction of free credit:

1. loan agreement,
2. A credit agreement within the meaning of the Banking Law,
3. an agreement to defer monetary performance if the consumer is required to pay the costs associated with the deferral,
4. A credit agreement in which the creditor incurs an obligation to a third party, and the consumer undertakes to repay the creditor for the performance rendered,
5. revolving credit agreement.

Errors in credit agreements that allow sanctions to be applied

In order to benefit from the sanction of free credit, there must be violations listed in the Consumer Credit Act in the loan agreement. Dowlegal experts point out the most common mistakes that allow borrowers to claim their rights:

• Incorrectly stated APR (Annual Percentage Rate of Interest) – banks often miscalculate or misrepresent the annual percentage rate of interest, which affects the assessment of the actual cost of the loan.
• Inadequate form of the contract – the loan should be in writing or in a durable medium, and the customer must receive a copy.
• Lack of information about the repayment date and rules – the contract must clearly specify the date of termination of the loan and the procedure for repayment.
• Unclear terms of early repayment – the lender is required to specify precisely whether and under what conditions the loan can be repaid early.
• Hidden commissions – adding additional fees to the amount of the loan without providing fair information to the consumer is a violation of the law.
• Incomplete cost information – the lender must clearly present all fees, and they must not exceed the legal limits.

How to apply for free credit sanction with the help of Dowlegal Law Firm?

Sanctioning free credit is an effective way to recover wrongly charged fees. The process follows several key steps:

1. Free analysis of the contract – our experts thoroughly check the documents for violations of the Consumer Credit Act completely free of charge.
2. Preparation and delivery of the statement – if we detect irregularities in the contract, we prepare a professional statement on the use of the sanction of free credit and send it to the lender-bank.
3. Bank response – the financial institution is obliged to consider the application. In practice, banks often refuse to recognize the sanction, which may require further action.
4. Litigation – if the bank defaults, we provide full legal support and representation before the court. Our experienced attorneys ensure the highest quality of case handling.

Latest CJEU rulings on free credit sanctions

The interpretation of the provisions on the sanction of free credit has repeatedly been the subject of preliminary inquiries to the Court of Justice of the European Union (CJEU), resulting in a ruling that may shape the practice of applying this legal institution.

Dowlegal’s lawyers continuously analyze these rulings in order to adapt legal strategy to current guidelines and provide clients with the most effective protection of their interests.

In one of the most important judgments, issued on February 13, 2025, the CJEU settled a dispute between the Lexitor sp. z o.o. and the banking institution, confirming that the sanction of free credit is a proportionate and effective tool to protect consumers. The Court stressed that the sanction is automatic in the event of a lender’s violation of its disclosure obligations, which means that the consumer is not required to take additional steps to apply it. This is because the lender itself is responsible for providing full, reliable and understandable information on the terms of the loan, including the Annual Percentage Rate of Interest (APR) and all costs associated with the commitment.

In addition, the CJEU pointed out that national courts (including Polish ones) are obliged to examine ex officio all circumstances that could form the basis for the sanction of free credit, even if the consumer has not invoked them in his application. This approach is intended to strengthen the position of the consumer, who often does not have sufficient legal knowledge to point out all violations on the part of the lender on his own. In practice, this means that the courts are obliged to actively seek grounds for sanctions, which is an important support for borrowers.

The ruling is particularly relevant to cases in which lenders have failed to provide consumers with transparency about the terms of the contract, such as through unclear wording, lack of information about the APR or hidden fees. In such cases, the sanction of free credit can be applied even if the consumer was not aware of the violations at the time of entering into the contract. (READ MORE – THE LINK TO THE RULING COMMENTARY IS ON OUR SITE).

Thanks to the latest CJEU case law, Dowlegal Law Firm regularly updates its legal strategies to effectively represent clients’ interests in free credit sanction cases. We use these rulings to increase our clients’ chances of favorable settlements, providing them with comprehensive legal protection in consumer credit-related litigation. Our actions are based on deep analysis of regulations and case law, which allows us to effectively fight for consumers’ rights in every case of violations by lenders.

Free credit sanction vs. franking credits – differences and similarities

Many consumers ask themselves how the sanction of free credit differs from franking credit cases. Although both types of cases involve the protection of consumer rights, there are several key differences that are worth understanding in order to make an informed decision about whether to pursue your claim. Dowlegal lawyers regularly face questions on this topic, so we decided to provide a detailed comparison of the two institutions.

Franc loans – the problem of abusive clauses and currency risk

In the case of franc loans, the most common problem is abusive indexation or denomination clauses, which allowed banks to unilaterally set loan installments. In addition, the lack of full information about currency risks led to situations in which borrowers were unaware of the full costs associated with the loan. As a result, many people taking out franc loans suffered huge financial losses.

Sanction of free credit – violation of information obligations

The sanction of free credit applies to violations of the Consumer Credit Law, in particular, errors in informing consumers of the total cost of credit, including interest rates, commissions or other additional costs. In this case, instead of a complete cancellation of the credit agreement, the borrower is entitled to a refund of only the principal without interest and other credit charges.

Loan value and collateral

Franc loans are usually mortgages, often of high amounts, which are secured by a mortgage on real estate. In contrast, the sanction of free credit applies to consumer loans – usually not secured by a mortgage – with a value of up to PLN 255,550.

Effect – cancellation of the contract or removal of the cost of the loan?

In franking loan cases, claims usually result in the cancellation of the loan agreement, which means that the borrower can get a refund of all payments made. On the other hand, the sanction of a free loan results in the release of interest and other costs, but the borrower is still obliged to repay the borrowed capital.Our law firm has successfully handled cases involving both the sanction of a free loan and franking credits. In each case, we analyze the individual circumstances, which allows us to tailor the appropriate legal strategy and ensure the best possible outcome for our clients. If you have doubts about your loan agreement, contact us – we will help you recover the overpaid funds!