On 29.08.2023. The Financial Supervision Commission published an announcement "Placing loan institutions under the supervision of the FSC". in which it recalled that as of January 1, 2024, the consumer lending activities of lending institutions will be subject to the supervision of the FSC, and that a lending institution, in order to be able to conduct consumer lending activities as of 2024, must meet the statutory requirements by December 31, 2023.
The announcement has raised many inquiries and doubts, meanwhile it does not change what has been known for a long time.
# What is a Loan Institution
The legal definition of "lending institution" (as modified by the Anti-Counterfeiting Act) is found in the Consumer Credit Act and is based on the definition of a lender under that Act ("lender"- an entrepreneur within the meaning of the provisions of the Act of April 23, 1964. - Civil Code, who, within the scope of his business or professional activity, gives or promises to grant consumer credit; "lending institution" -. lender other than...). A Loan Institution is an entity whose business is to provide consumer credit in the form of deferred payment of price or consideration for the purchase of goods and services it offers (Article 5(2a)).
# What requirements does the law provide for Loan Institutions
When engaged in the business of providing loans to consumers (Loan Institution), the entity is subject to special requirements, including, among others:
- The obligation to use a credit score (Article 9a of the May 12, 2011 Law on Consumer Credit);
- obligation to operate in the form of an S.A. or Ltd. (with a supervisory board) with a minimum share capital of PLN 1,000,000 contributed in cash (this is the biggest change in practice requiring capital transformation on the part of many loan companies);
- among the bodies of lending institutions must not include persons with criminal records for economic, fiscal, documentary crimes;
- obligation to obtain an entry in the Register of Loan Institutions maintained by the FSC (Article 59ac of the May 12, 2011 Law on Consumer Credit) and the possibility to start operations only after the entry;
- Supervision costs of 0.5% of the total revenue generated from consumer credit activities for the preceding fiscal year and not less than the PLN equivalent of €5,000, (as of 1.01.2024);
- Supervision of the Financial Ombudsman (in terms of the application of the so-called complaint procedure) - based on the Act of August 5, 2015 on the processing of complaints by financial market entities and the Financial Ombudsman) + incurring contributions for the maintenance costs of the Ombudsman's Office - contribution in the amount of the sum of consumer loan assets x 0.025% (Article 20 of the Act on the processing of complaints by financial market entities and the Financial Ombudsman).
# Sanctions
For failure of loan institutions to comply with their information obligations, or improper performance of this obligation, and in the event that it is found that the activities of a loan institution are carried out in violation of the Act or in violation of the conditions set forth in the Act, the FSC will be able to, among other things, (i) impose an administrative monetary penalty of up to PLN 15,000,000 on a loan institution, or (ii) strike it from the register of loan institutions or the register of credit intermediaries. On the other hand, the FSC may impose an administrative fine of up to PLN 150,000 on the member of the board of directors of a loan institution directly responsible for the irregularities found.
# What about b2b loan companies?
A loan company that provides at least a small portion of loans to consumers will meet the requirements of a Lending Institution.
However, a Lender making ONLY b2b loans in our opinion today will not meet the definition of a "lending institution" and neither the supervisory regulations nor the organizational requirements described earlier will apply to it).
However, the above requires a very clear delineation of its activities in this regard consisting of clearly defined directions and the creation of a kind of compliance system and control mechanisms. These include (i) precise and clear formulation of the purpose of the loan in contracts / regulations for purposes related to business activity only, (ii) use of statements of the borrower about the nature of the loan and its purpose and the conduct of business activity, (iii) avoiding as clients "new" entrepreneurs-JDGs e.g. established a few weeks before the loan, (iv) archiving for contracts documents confirming the conduct of business by the borrower (e.g. copy from the KRS/CEiDG, printout from the White List, etc.), (v) not limiting itself to JDG alone, but financing as broadly as possible companies, including commercial companies, (vi) disbursing the loan only to a bank account maintained "in the company's name" and disclosed on the White List; (vii) controlling (preferably in an automated manner) borrowers in terms of: CEiDG entry activity, White List entry activity, White List VAT status activity; (viii) introduction of mechanisms to control how the loan is used for business purposes; (ix) limitation of "consumer" collateral so that there are no situations in which it is, for example. guarantors who are individuals in practice repay the loan in full, and the borrowing entrepreneur himself was only to obtain the loan.
However, the topic is more complicated than outlined above and, due to the framework of this blog and article, has only been hinted at.
[The text does not constitute legal advice, it only reflects the subjective views of the author].
