Over the past six years, bank fees for granting cash loans have increased almost fourfold. Interest on loans today is only a quarter of the total cost of credit. For several years in the Polish market, there have been low-interest rates.
This meant that banks could not charge interest higher than 10% per annum. For comparison, in 2013, the interest was a maximum of 25%. And this means that banks had to find something that would allow them to earn more from customers.
What do banks earn on?
If it was no longer possible to earn interest, banks had to somehow compensate for losses and fell on commissions. The statutory maximum commission limit is 25% plus 2.5% for each repayment month.
Attempts have also been made to attach mandatory paid insurance to loans and credits, but this has been curtailed by the so-called Recommendation U, issued by the Polish Financial Supervision Authority. It says that if the bank requires additional insurance, the customer does not have to buy a policy at the bank, and can find a better one and usually much cheaper with any other insurer.
Six years ago, the average cost of commission for a cash loan contracted for a year in the amount of USD 10,000 fluctuated between 2.5 and 3%. Today it is 9-10%.
Commission (not) to be refunded
For most customers, it doesn’t matter if the cost of the loan is called interest or commission. However, this is a wrong assumption, because if we repay the loan earlier – we will save on monthly interest, but the commission was considered as a one-off cost of granting the loan for a given period.
At the time of full repayment ahead of time – banks should return a proportionate proportion – such a position was taken by the Financial Ombudsman and the Office of Competition and Consumer Protection.
Unfortunately, banks do nothing about it and treat these positions as a guide only. Fortunately, there is a very good chance of recovering the commission through court – in this case, the courts very often take the side of consumers.
Banks do not admit that their interest income has dropped significantly and are trying to catch up with other fees. It is worth knowing about this when going to the bank for a loan – if we deal with an advertised offer without interest or 0% – we can be sure that the fees have been hidden somewhere else.