The consumer credit market has evolved considerably in recent years, mainly due to increased interest from regulators. Both at national and European level. These changes, mainly aimed at protecting consumers, have included a reduction in maximum non-interest costs and the introduction of mandatory creditworthiness checks by lending institutions. But this is not the end of the story, as further changes are expected to come in the sector.
Changes in lending institutions
Since 1 January 2024, as a result of the adoption of the Anti-Usury Act, lending institutions have been placed under the supervision of the Polish Financial Supervision Authority (KNF), including in particular:
- Analysis of the sources of funds from which consumer credits are granted
- Examination of quarterly and annual reports
- Correctness of the granting of consumer credits
These changes imply new requirements for the legal form and minimum share capital of lending institutions and the need for these organisations to have a supervisory board.
For many entities, these requirements can be a major challenge, particularly when it comes to the need to increase share capital and register in the Register of Business Entities of the National Court Register.
KNF supervision and consumer protection
The KNF’s supervision of lending institutions is aimed at ensuring the proper functioning, stability, security and transparency of the market. It is a precedent in Poland that the body dealing with the stability of the financial market also takes over some of the consumer protection functions previously performed by the President of the Office of Competition and Consumer Protection (UOKiK) and the Financial Ombudsman.
Impact of the changes on the market for lending institutions
The new regulations and supervision by the KNF may have a significant impact on the market for lending institutions.
On the one hand, the introduction of stricter requirements may lead to increased security and transparency in the consumer credit market.
On the other hand, stringent requirements and potential financial penalties may create challenges, especially for those who will find it difficult to comply with the new regulations.
Lending institutions will also have to comply with other supervisory guidelines to ensure the safety and security of trading. Together with increased regulatory compliance requirements, these changes may affect the profitability of the products and services offered. Firms will need to adapt to the new limits, which may affect their pricing strategy and product offerings.
CCD2 and its impact on the market
The Directive of the European Parliament and of the Council on consumer credit agreements (CCD2) introduces significant changes that will affect the operation of lending institutions, in particular:
- Increasing the cap for consumer credit amounts
- Extending the list of agreements qualifying as consumer credits
- Introducing limits on the annual percentage rate of charge
The Anti-Usury Act raises questions
Lending institutions are now faced with the challenge of understanding, interpreting and defining the scope of application of the regulations in their business models.
This is clearly evident in the Cloud Communication and the DORA, which they will have to comply with by the end of this year. There are undoubtedly other issues and areas that will need to be looked at very carefully in the near future to ensure compliance.
These issues are being discussed very intensively at this stage. However, lending institutions will certainly need assistance to best adapt to the new requirements.
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