The debtor will have to pay penalty interest. We explain how the rate of such additional interest is determined.

The debtor will have to pay penalty interest. We explain how the rate of such additional interest is determined.

Calculation of penal interest is one of the most important financial sanctions that meet a person who does not pay their non-bank loan or credit at a bank or SKOK inadvertently. It is worth knowing that all institutions providing consumer loans (ie banks, credit unions and non-banking companies) must follow the same rules for calculating criminal interest. These principles are described in detail in the Civil Code. It is worth taking a look at the provisions of this Code regarding criminal interest, because in 2016 they have undergone significant changes. Such legal changes also concerned other types of interest appearing in loan agreements.

Interest for delay can be statutory or maximum?

Interest for delay can be statutory or maximum?

At the outset, it is worth noting that the wording “penalty interest”, which often appears in various types of articles and studies, is purely colloquial. In the Civil Code (CC) we will not find any mention of penal interest. Their official name (appearing, among others, in the Central Committee) is interest for delay. It must be realized that such interest plays an important role not only in various types of loan agreements. Their application is common in all types of contracts providing for the obligation to perform some cash payment. In accordance with article 481 paragraph 1 of the Civil Code, a creditor may demand from the debtor to pay interest for a delay in payment even if due to late payment no damage occurred and the delay was not dependent on the fault of the debtor. This rule also applies to loan and bank loan agreements. The consumer concluding such contracts can not later rely on the fact that the late payment of the installment (resulting in the calculation of criminal interest) was independent of his fault.

According to the binding provisions of the Civil Code, the parties may set the amount of penal interest under the contract. Such contractual interest should, however, not exceed the maximum rate. Starting from January 1, 2016, the maximum interest rate for delay (specifying the maximum interest on arrears) amounts to twice the statutory interest for delay.

The statutory interest for delay also plays a very important role. They are taken into account when the parties to the contract have not established interest rates on arrears. According to current regulations, statutory interest for delay is the sum of the reference rate of the National Bank of Poland (currently: 1.50%) and a fixed rate of 5.50 percentage points. As at the date of preparation of this article (18 January 2019), the statutory interest rate for delay was 7.00%. The maximum interest for delay at the same time was at the level of 14.00% (2 x 7.00%).

With reference to the topic of maximum interest for delay, it is worth mentioning that all contractual clauses providing for a penalty rate higher than the current limit are not valid. In this case, the creditor may only demand the amount calculated using the maximum interest for late payment.

An important principle is also set out in article 33a of the Consumer Credit Act. According to this provision, the sum of additional fees for delay (including the cost of notifications to the debtor) and the interest itself for delay can not be higher than the amount that would result from the application of maximum interest for delay. If such a sum exceeds the statutory limit (currently: 14.00% of annual overdue payments), the consumer is not obliged to pay the bank, SKOK or a loan company to pay the surplus.

The new rules also apply to the maximum loan interest

The new rules also apply to the maximum loan interest

As part of completing the topic of interest for delay, it is also worth mentioning another very important type of interest. It is about the interest rate of a given liability (eg interest on a loan or a loan). It is worth knowing that the Civil Code formulates some general rules regarding the amount of interest for using other people’s money. Such rules also apply to all kinds of private loans, for which the Consumer Credit Act does not apply.

The Civil Code assumes that the parties to a given contract will determine the percentage remuneration for using the borrowed funds. Such self-determined interest may not, however, exceed the maximum rate. The maximum level of interest until January 1, 2016 was defined as four times the lombard rate of the National Bank of Poland. Currently, maximum interest rates are defined as twice the statutory interest rate. With these statutory interest, we are dealing when the parties to some contract did not specify the interest rate on the amount borrowed. Such a situation does not appear on the loan and credit market. According to the current regulations, the statutory interest rate is the sum of the reference rate of the National Bank of Poland and a fixed rate of 3.50 percentage points.

As at the date of this article, statutory interest was 5.00% per annum (1.50% + 3.50%). According to the regulations, maximum interest rates were twice as high (10.00% per annum). Such a 10% limit set the maximum interest rate, among others for non-bank loans, credit cards and cash loans. It is worth remembering that the interest rate limit introduced by the Civil Code is something completely different from the general limit of credit costs under the Consumer Credit Act.