In fresh years, the question of the correct usage of WIBOR in credit agreements and the relation between variable interest rates and consumer protection has become 1 of the most dynamic topics in the Polish legal and financial debate. It culminated in a question referred to the Court of Justice of the European Union (TEU) for a preliminary ruling on both the compatibility of the plan of contracts based on WIBOR and the possible limitations of EU consumer law in terms of interest rates. In particular, the issue of Upper interest rate and its possible contradiction with the principles of fairness and transparency (the case is presently under file number C-471/24). The expert comments on the substance – Matthew Brembor, Legal advisor at the Chancellery of Yacht Saturday.
What is WIBOR and what are its disadvantages?
WIBOR (Warsaw Interbank Offered Rate) is simply a benchmark determining the cost of money in the interbank market. For years, it has been a key component of the interest rate on variable-rate loans in Poland – both consumer and mortgage.
In the face of dynamic interest rate increases after 2021, borrowers began to question the legality of WIBOR, accusing banks of:
- lack of adequate information on the hazard of a variable rate;
- lack of transparency in how the index is shaped;
- the usage of a non-exhaustive indicator from actual interbank transactions;
- the disproportionateity of the increase in interest rates to the economical basis of credit.
This in turn led to litigation in which judges began asking questions about the compatibility of Polish regulations and practices with the EU Directive 93/13 on unfair contractual terms.
What questions about WIBOR have so far been addressed to the TEU?
The Polish courts, examining the WIBOR dispute, raised questions to the Court of Justice of the European Union (EUSJ) on:
- whether clauses referring to the WIBOR index can be regarded as unfair if the consumer did not have a real anticipation to measure its designation mechanism,
- whether the indication in the contract of only the name of the indicator, without describing how it is determined, meets the request of transparency,
- whether the variable interest rate mechanics can lead to a breach of the equilibrium of the parties erstwhile the increase in the index is not due to actual marketplace transactions.
How is the interest limit to consumer protection?
The latest question referred by the Krakow territory Court on the case in which the CEU issued a mention to the file: C-607/25, concerns Upper limit of permitted interest and whether its full absence in the credit agreement could violate EU consumer protection standards. The case concerns a contractual standard prepared by BNP Paribas Bank Polska S.A., where the credit agreement does not supply for any interest limit that may in any cases exceed the maximum interest rate.
Polish law provides, indeed, maximum interest and maximum interest for delay, but this regulation applies only to the percent of capital counted in percentages per year as by-products. On the another hand, the interest rate on loans based on WIBOR consists of 2 elements:
- Bank margin (fixed),
- WIBOR indicator (variable).
The law does not introduce a limit on the interest rate on variable rate loans. As a result, as WIBOR grew rapidly, many borrowers felt that interest rates had become disproportionate and ‘extremely excessive’.
In the justification for the question referred for a preliminary ruling, the Court of First Instance indicated that the Polish rules do not set an advanced limit for the permissible increase in the benchmark. The rules besides do not set maximum margins for the increase in margins, and the maximum percent may vary over the full credit period, giving emergence to doubts as to the conformity of specified arrangements with Directive 93/13.
Summary
The question referred for a preliminary ruling concerning WIBOR and the advanced limit of interest in credit agreements is 1 of the key moments in disputes about transparency and fairness of the construction of loans in Poland. The answer may depend not only on the future of contracts concluded in fresh years, but besides on the form of the full credit market.
Regardless of the final outcome, this case shows that the function of EU consumer law in the financial sector is expanding and that the mechanisms utilized by banks must not only comply with national law but besides be full understandable and transparent to the average consumer.
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