Placing the loan industry under the supervision of the PFSA

Time order

Anti Usury Act – go to the content of the act on the pages of the publisher (active link 29.11.2023).

• published 17.11.2022, partial entry into force on 18.12.2022, 18.05.2023, 1.01.2024
• effective as of 18.05.2023, the amendments introducing the supervision of the PFSA over the loan industry will, in principle, come into force on 1.01.2024 (except for Article 5.1 of the Anti Usury Act amending the Law on Financial Market Supervision, which came into force on 18.05.2023).

Scope and objectives of the PFSA's supervision of the loan industry

The Anti Usury Act introduces a new Chapter 5ab Supervision of the Activities of Lending Institutions to the Law of May 12, 2011 on Consumer Credit (i.e., Journal of Laws 2023, item 1028, as amended) (the “UKK“), which regulates the PFSA’s supervision of the lending industry.

The purpose of the PFSA’s supervision of the activities of lending institutions is to control and enforce compliance of these activities with the UKK. Thus, the basis for the PFSA’s supervisory activities over loan institutions will be solely the provisions of the UKK. The PFSA will not be authorized to determine the performance of the activities of loan institutions in violation of laws other than the UKK. The limit of the supervisory measures taken by the PFSA against loan institutions will therefore be the framework of the UKK.

The PFSA’s supervision will cover the activities of lending institutions in the field of consumer credit. Among the typical areas that may be subject to examination by the PFSA may be, among others, the process of assessing a consumer’s creditworthiness, which takes into account Article 9a of the UKK introduced by the Anti Usury Act, compliance with the limit on non-interest credit costs (MPKK), the method of settling early repayment of consumer credit, etc.

It should be emphasized that the PFSA will not be authorized to verify individual contracts concluded with consumers, as well as to order the modification or termination of concluded contracts, including in the event that they are found to have been concluded in violation of the provisions of the UKK. Supervisory measures taken by the PFSA will not be allowed to violate contracts concluded by lending institutions under the provisions of the UKK.

Nature of supervision

The PFSA’s supervision of the lending industry will be a mixed supervision. It will be a prudential supervision focused on ensuring the safety of the financial system, familiar from the banking sector. At the same time, it will complement and provide synergy with the supervision exercised by the President of the Office of Competition and Consumer Protection (“UOKiK”) in enforcing consumer protection. Under the provisions of the Anti Usury Act, the PFSA has not been equipped with the typical powers of a consumer protection authority, but this does not preclude the PFSA from taking action against lending institutions when it identifies practices that are inconsistent with the UOKiK’s regulations and that violate consumer rights. In such cases, the PFSA may make recommendations to the loan institution within the framework of possible supervisory measures, or signal to the President of the UOKiK the identified practice to the extent necessary for that authority to carry out its statutory tasks.

The Anti Usury Act does not make any changes to the powers vested in the Financial Ombudsman, to whom consumers’ complaints in their individual cases will still be able to be addressed.

Reporting obligations of lending institutions

Changes to the UKK regulations also include reporting obligations of lending institutions to the PFSA. Loan institutions will be required to provide the PFSA with quarterly and annual reports on their consumer lending activities, which will include key information on, among other things, consumer loans granted, consumer credit agreements concluded, or total revenue generated from consumer lending activities. The detailed scope of information provided in the quarterly and annual report of a lending institution on its consumer credit granting activities is set forth in the Finance Minister’s Regulation of October 31, 2023 on information provided in reports on consumer credit granting activities of lending institutions, which will come into effect on January 1, 2024. The PFSA may also require a lending institution to provide or periodically submit information, documents or data necessary for the purpose of inspecting and enforcing compliance of the lending institution’s activities with the UKK, other than information provided as part of quarterly and annual reporting.

Other obligations arising from being under the supervision of the PFSA

Control of the performance of lending institutions as obligated institutions in the area of AML and terrorist financing under the AML Act of March 1, 2018 (i.e., Journal of Laws of 2023, item 1124, as amended) (the “AML Act“) will be exercised by the FSA in addition to the General Inspector of Financial Information (Article 130(2)(1)(b) of the AML Act). In addition, lending institutions will be required, as of January 1, 2024, to align their activities with the European Banking Authority’s Guidelines on Compliance Management Strategies and Procedures and the Role and Responsibilities of the AML/CFT Compliance Officer (see Practical aspects of the application of the EBA guidelines AML/CFT Compliance Officer).

Catalog of supervisory measures available to the PFSA

The PFSA will be equipped with a number of supervisory measures it can take against a lending institution in the event of:

• failure to fulfill or improperly fulfill the obligation to submit quarterly or annual reports on consumer credit activities (Article 59dg(1) of the PFSA);
• failure to fulfill or improperly fulfill the obligation to submit or periodically submit information, documents or data necessary to fulfill the purpose of the PFSA’s supervision of the activities of lending institutions (Article 59dh(1)(1) UKKK);
• failure to implement within the time limit set by the PFSA the recommendations for ensuring compliance in the provision of consumer credit with the UKK (Article 59dh(1)(2) of the UKK);
• determination that the activities of a lending institution, including those carried out with the participation of a credit intermediary, are carried out in violation of the UKK or contrary to the conditions set forth in the UKK.

The occurrence of at least one of the above violations is sufficient for the application of supervisory measures against a lending institution.

The PFSA will be equipped with the following supervisory measures against lending institutions:

• imposition of an administrative monetary penalty of up to PLN 150,000 on the member of the board of directors of the lending institution directly responsible for the irregularities found, including in the case of cessation of functions in the board of directors of the lending institution;
• imposing an administrative fine of up to PLN 15 million on a loan institution, also in the case of deletion of the loan institution from the register;
• Application to the supervisory board of the loan institution to dismiss the member of the board of directors directly responsible for the irregularities found;
• Suspension of the member of the management board directly responsible for the irregularities found, until a decision is made on the PFSA’s request to the supervisory board of the loan institution to dismiss the member of the management board;
  deletion of the lending institution from the register of lending institutions and from the register of credit intermediaries – if the lending institution is simultaneously entered in this register.

In addition, the PFSA will make public information about the application of the above sanctions, unless disclosure of such information could disproportionately harm the legal interests of the parties involved. Information on the imposition of a fine and suspension of a member of the board of directors of a lending institution will be provided by the PFSA to the public, provided that the administrative decision in this regard is final.

Action plan for lending institutions

1. By November 30, 2023
   • To report to the PFSA on the steps taken toward meeting the requirements prescribed for lending institutions;
2. By December 31, 2023
   • choice of legal form – if the lending institution is considering changing it (according to the UKK, the possible legal forms are a joint stock company and a limited liability company);
   • appointment of a supervisory board, including in limited liability companies;
   • ensuring the required level of share capital of a minimum of PLN 1 million, covered only by cash contributions, with the funds to cover the share capital not to come from a loan, credit, bond issue or other debt instruments, or from undocumented sources (except for a bank loan or a loan from related parties, under certain conditions);
   • obtaining an entry of the aforementioned changes in the business register of the National Court Register competent for the lending institution;
3. Best practices
   • establish a dedicated process at the lending institution to ensure participation of all stakeholders (e.g., accounting, sales, after-sales, collection, product, compliance, legal areas) in the fulfillment of disclosure obligations to the PFSA;
   • adequate preparation for contacts with the PFSA, including handling potential PFSA recommendations;
   • ongoing monitoring of the PFSA Office’s website as it relates to lending institutions, including any announcements published by the Department of Institutions for Lending (DIP) established within the PFSA Office’s Legal and Regulatory Division.