Zloty loan with WIBOR - what should I know? - Kancelaria Adwokacka Adam Gautier

Zloty loan with WIBOR – what should I know?

Zloty loan with WIBOR – what should I know?

What is WIBOR ? 

WIBOR stands for Warsaw Interbank Offered Rate. In simple terms, it is the interest rate on the interbank market at which banks agree to lend to each other. It is therefore an indicator of the amount at which a bank borrows money in the financial market in order to put it into circulation and lend it further to its customers. It is intended to compensate banks for the cost of raising funds made available to customers in the form of a loan or credit. The WIBOR reference rate is determined as the arithmetic average of interest rates from information provided by the 10 largest banks operating in Poland. The WIBOR rate is determined on the basis of transactions between banks that lend money to each other. It is a fuctuating index, determined almost daily, which has a significant impact on your credit.

What are the borrowing costs linked to the WIBOR reference rate? 

The WIBOR reference rate is part of the interest rate on your loan, which, in addition to WIBOR, also consists of a fixed margin for the bank as its remuneration. In loan agreements, you may encounter different variants of WIBOR such as 1M, 3M, 6M, 12M. This symbol is an indication of how many months the WIBOR will be updated in relation to your loan instalment, and therefore how often the interest rate and consequently the amount of your instalment will change. 

Why are loan contracts with WIBOR interest rates flawed? 

Firstly, this is due to the flawed way in which the contractual interest rate is determined based on the WIBOR reference rate. Currently, the WIBOR rate is not based on the actual costs that banks needs to raise funds. The WIBOR refers to the costs banks would incur if they borrowed funds from each other. Meanwhile, in reality, banks’ lending is based not on interbank loans, but on deposits, the interest rate of which, it should be stressed, is much lower than the interest rate on a loan, so the costs that banks incur in order to raise money for their customers are actually lower than banks declare. The WIBOR reference rate does not in fact reflect the real cost of raising capital by the bank, and is significantly inflated relative to such a cost, and is not an afterthought to the transactions made by the bank, but results only from declarations made by financial institutions. Such excess becomes an additional cost of credit that the bank receives from its customer. It is therefore a hidden cost on one side that appears in terms of the recalculation of the instalment.

Secondly, the defectiveness of such contracts is due to the bank not properly informing the consumer of the economic consequences associated with interest rate changes and the actual scale of the unlimited risk associated with the variable interest rate, as well as the lack of information on what WIBOR is and how it affects the loan.

Contracts are supposed to be transparent and allow borrowers to verify the amount of the loan instalment and the interest rate charged by the bank. The agreement cannot give the bank complete freedom to set the interest rate by stating that a change in the interest rate „may take place” in the event of a change in the reference rate. Consequently, the bank should adequately and comprehensively warn the customer of the risk that paying instalments will become unaffordable in the event of a strong interest rate increase.

Based on the above circumstances, it can be concluded that contracts for PLN loans with interest rates based on the WIBOR rate may contain prohibited contractual provisions

What can I do if I have entered into a PLN loan agreement with a bank with WIBOR? 

 We encourage you to analyse your loan agreements in order to assess whether they are defective and whether the provisions concerning the WIBOR reference rate may be challenged. Each case should be assessed individually, so an analysis of a specific agreement will allow us to clearly determine whether the agreement has been structured in a defective manner or whether it contains prohibited provisions, and then we will be able to determine what action, if any, we can take against the bank.

Could there be negative consequences for taking action against the banks? 

Banks cannot sanction, penalise or punish customers who assert their rights, make claims in order to restore the balance between the parties, so that the mutual benefits are equivalent on both sides and not only on the side of the customer to compensate for the increases. According to the jurisprudence, as well as the position of the European Union institutions, banks cannot draw negative consequences, e.g. by giving notice of termination, against customers who take this type of action. There are no grounds for this type of behaviour on the part of financial institutions.