The prohibition of anatomicism aims to protect the debtor from excessive financial burden which would entail delay in the performance of the cash benefit. The new law on exceptions to the ban on anatomicism is intended to prevent the increase in the debt of clients of credit institutions and the collapse of the so-called debt loop.
On 15 February 2019 entered into force Act dated 6 December 2018 amending the Act – Civil Code (Journal of Laws of 2019, item 80) consisting of third short paragraphs (i.e. having an extraordinary brevity for a legislative act), repealing Article 482(2) Act dated 23 April 1964 – Civil Code (i.e. Journal of Laws of 2018, item 1025, hereinafter ‘KC’), which was one of the three legally permissible exceptions to the ban on anatomy.
In practice, very often the interest rate on interest was a complex and vague mechanism for the average borrower, which made it difficult to see the actual and total amount of claims owed to the bank. The new law can therefore be regarded as a proponent of the legislature towards borrowers to increase transparency of the debt structure
Prohibition of anatomy in Polish law
The prohibition of anatomy, i.e. the calculation of interest on late interest, applies under Polish law in accordance with the general principle expressed under Article 482(1) KC. Interpretation Article 482(1) The KC makes it possible to derive from the wording both the above-mentioned general principle of the prohibition of interest on late interest (anatocism) and to indicate two exceptions to that principle.
Article 482(2) KC, on the other hand, was third the exception to the prohibition of anatomicism, indicating that ‘the provision of the preceding paragraph shall not apply to long-term loans granted by credit institutions’.
The concept of late interest within the meaning of Article 482(1) KC covers both equity and late interest (see Supreme Court Judgment – Civil Chamber dated 1 October 1998, reference no. I CKN 782/97, Legalis No 43053).
Exceptions to the ban on anatomicism specified under Article 482(1) KC
According to Article 482(1) KC on outstanding interest may be requested interest on late payment only from the moment of the action for late payment, unless the parties agreed to add outstanding interest to the debt sum after the backlog arose.
first the derogation allows interest to be charged on interest for late payment from the date of entry into the course of judicial proceedings in order to investigate them by bringing an action.
It is most often done by adding to the content of the dispute the amount of outstanding interest at the date on which the action is brought and then charging the amount of the principal claim of the relevant interest from that date.
It is also acceptable to make a claim in such a way that the amount of the main claim and the amount of interest already accrued on which further interest should be charged is separately indicated.
second an exception will arise if the parties decide by contract to increase the amount of the main benefit by the amount of interest charged. In the case of contractual capitalisation, the parties agree to recognise the accrued interest due as part of the main benefit and to cover the total amount thus generated by the single interest rate.
Exception to the ban on anatomicism specified under Article 482(2) KC
In the current state of the law Article 482(2) KC was third an exception to the prohibition of anatomicism, indicating that ‘the provision of the preceding paragraph [i.e.
Article 482(2) KC — author] does not apply to long-term loans granted by credit institutions.’ Doubts arising with regard to the understanding of the concept of credit institution and the circumstances or exceptions Article 482(2) KC should be applied to the credit agreement together with the systemic transformation, to some extent it has only dispelled the case law.
The view is now considered dominant in the justification of the Supreme Court judgment - Civil Chamber dated 29 November 2001 V CKN 603/00 – Legalis number 326814)the position that the prohibition of anatomicism does not apply by force Article 482(2) KC, both loans and long-term loans granted by credit institutions, including in particular by banks.
Ratio legis amendments
As has already been mentioned, pending its repeal by the legislature, Article 482(2) KC was third the exception to the prohibition of anatomicism, which may only be applied to credit institutions when granting long-term loans. However, the explanatory memorandum of the draft amendment states that "the main problem of the current regulation is the unwarranted advantage of credit institutions, which are undoubtedly the stronger party to the civil relationship, namely the credit agreement or loan, at the expense of debtors".
Repeal Article 482(2) In the assessment of the project promoter, it will prevent the increase in the debt of clients of credit institutions and the collapse of the so-called debt loop for the possibility of an agreement in advance to pay interest on late interest (so-called compound interest), without bringing an action.
Comment
The legislative amendment escapes a clear assessment. In practice, very often the interest rate on interest was a complex and vague mechanism for the average borrower, which made it difficult to see the actual and total amount of claims owed to the bank.
The new law can therefore be regarded as a move by the legislator towards borrowers to increase transparency of the debt structure.
On the other hand, to repeal credit institutions' ability to collect interest on interest in advance will enable them to seek alternative solutions to safeguard their property interests, even by increasing the interest rate on the amounts granted.
Author:
Michał Skwarek – a solicitor in the Legal Department. Graduate of the Faculty of Law and Administration of the University of Warsaw