Although we deal with broadly understood finances almost every day, it often turns out that the problem is for us to define even some basic concepts. On the one hand, it can be evidence of what experts of all kinds often say, namely too low level of economic awareness of our society.
Credit and consumer credit?
On the other hand, it is not uncommon for problems with a precise distinction between two different concepts to a large extent simply due to the ambiguous nature of Polish provisions. It is this remark that applies to the distinction between the terms consumer credit and consumer credit.
In practice, these two terms are very often used in a completely interchangeable way. What’s more, this type of practice can often be found even in the press or websites. However, it is worth realizing that, despite very similar names, consumer credit is by no means the same as consumer credit .
Let’s take a closer look at this issue
First of all, it should start with the fact that the concept of “consumer credit” has a utilitarian rather than formal character. The law itself does not separate such a category of financial products as consumer loans. It would seem that this fact may be a bit easier from the point of attempts to define both concepts, but this is not entirely true. On the one hand, we are dealing with the Consumer Credit Act, which uses the term consumer credit not only in relation to services provided by banks or Cooperative Savings Banks, but also in relation to services provided by loan institutions. From this perspective, consumer credit will be, for example, online payday loan, non-bank installment loan or loan line.
On the other hand, the Banking Act defines the concept of credit as referring to financial services provided by banks. It is no wonder then that in practice an alternative and a slightly more precise concept has emerged – consumer credit. Let’s follow this through several points containing the most relevant information:
1. Each consumer loan is also a consumer loan, however, a consumer loan need not be a consumer loan
2. A consumer loan is also a loan granted by a loan institution (remember that a loan institution is an entity appearing in the Register of Loan Institutions kept by the Polish Financial Supervision Authority)
3. The provisions contained in the Consumer Credit Act shall apply to consumer loans
4. The Consumer Credit Act regulates the way not only banks, but also lending institutions operate
5. Consumer credit is a service belonging to the definition spectrum of consumer credit, which means that credit cannot be, for example, “consumer” and “mortgage”
Sounds complicated? Unfortunately, this is more or less the way in the current Polish legal reality. If, for example, we tried to eliminate the use of the concept of consumer credit, which is not specified by law, we would only get more chaos. It should be taken into account that the definition of consumer credit includes solutions as different as a credit card, revolving limit, installment loan in a bank ( consumer loan ) or non-bank installment loan .
What situations do the provisions of the Consumer Credit Act apply to?
It has already been mentioned that consumer and consumer credit is by no means one and the same. At the same time, it is worth realizing that the legal regulation of the concept of consumer credit also applies to the so-called non-banking sector. What does this mean in practice? Primarily:
1. A distinction should be made between legally operating lending institutions (entities appearing in the aforementioned RIP operated by the Polish Financial Supervision Authority) and other entities which in practice may also grant loans.
2. The provisions on consumer credit theoretically apply to all possible lenders, however, in practice only clients, banks, credit unions and lending institutions can be considered reliable lenders.
3. Companies with the status of loan institutions are not only obliged to act in accordance with the provisions of the Consumer Credit Act, but are also subject to supervision by the Office of Competition and Consumer Protection. However, in relation to other categories of non-bank lenders (parabanks, pawnshops, lenders), one should rather talk about the lack of systematic supervision.
4. Non-bank lenders , who do not have the status of loan institutions, very often appear on the Warning List of the Polish Financial Supervision Authority or the Consumer Warning List of UOKiK
Summary information about loans
So, as you can see, the issue of differences between the terms consumer credit and consumer credit is really important. Practice shows that customers using, for example, popular payday loans often do not even realize that a given loan is a consumer loan in accordance with the law, which imposes certain obligations on the lender, and the borrower grants certain rights.
Meanwhile, knowledge in this area and awareness of the formal difference between a lending institution and other types of non-bank lenders in many situations can be of great importance for our financial security.