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What is the Free Credit Sanction, what does it offer consumers, and why is the Financial Ombudsman’s General Statement of 1 December 2025 important in this context? Read our article to learn when you can repay a debt without interest, commissions and other credit costs. We also answer the question of whether entrepreneurs can use the Free Credit Sanction.
The Free Credit Sanction (SKD) – what is it and who can use it? Article 45 of the Consumer Credit Act
The Free Credit Sanction, or SKD, is a protective mechanism arising from Article 45 of the Consumer Credit Act that allows consumers to repay a debt without interest, commissions or other credit costs when the lender breaches obligations imposed by law.
On the one hand, it protects borrowers harmed by a bank’s unfair conduct by providing free credit; on the other, it sanctions lenders who breach specified obligations or make mistakes.
Using the Free Credit Sanction requires submitting a written statement. Under paragraph 5 of the aforementioned Article 45 of the Consumer Credit Act, this must be done within one year of the contract being performed.
The statement on the Free Credit Sanction – what does it say and why is this view so important for borrowers? The deadline and breaches allowing consumers to use SKD
According to many experts, this last issue raised considerable doubts about interpretation. Neither the Consumer Credit Act nor the explanatory memorandum to its draft specifies what “performance of the contract” means.
However, the Financial Ombudsman clarified this in the General Statement of 1 December 2025, explicitly stating that a contract is performed only when both parties have fulfilled their obligations. In other words, the one-year period for submitting an SKD statement begins only when the consumer has repaid the loan in full.
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In the statement discussed here, the Financial Ombudsman also identified breaches allowing the Free Credit Sanction to apply, dividing them into three groups:
- Failure to observe the written form of a consumer credit agreement;
- A lender’s breach, when concluding the agreement, of information obligations towards the consumer concerning its contents;
- Failure to observe limits protecting consumers against an excessive financial burden arising from a consumer credit agreement.
In the last context, the Financial Ombudsman paid particular attention to charging interest on financed commissions. Financing commissions and charging interest on them significantly increases the total cost of credit, which in turn affects the incorrect calculation of the APR (Annual Percentage Rate). In the Financial Ombudsman’s view, this is a breach that may enable borrowers to use the Free Credit Sanction.
The Ombudsman also emphasised that, for the Free Credit Sanction, neither the extent nor the significance of the breach matters, nor does its effect on the consumer’s interests.
Can entrepreneurs also use SKD? The Financial Ombudsman’s clear position allowing the Free Credit Sanction in one case
The Consumer Credit Act cited above, as its name suggests, is addressed exclusively to consumers. As a rule, this means entrepreneurs are not covered by its protection.
However, in the statement of 1 December, the Financial Ombudsman identified an important exception: agreements concluded by entrepreneurs for a purpose “not directly related to business activity”.
Loans taken out by people running businesses that are not closely connected with the subject of that activity may therefore hypothetically benefit from the protection of the Consumer Credit Act, including the Free Credit Sanction.
However, this may require a careful examination and proper proof of the actual purpose for which the entrepreneur used the borrowed funds.
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Summary
The Financial Ombudsman’s General Statement on the Free Credit Sanction – what does it tell us, and can entrepreneurs also use it?
In the General Statement of 1 December 2025 on the Free Credit Sanction, the Financial Ombudsman discussed the main problems arising in connection with this mechanism.
The Ombudsman clarified doubts about the interpretation of “performance of the contract” and identified breaches that may allow the Free Credit Sanction to apply.
Finally, the Ombudsman also recalled that entrepreneurs who conclude an agreement with a lender for a purpose not directly related to their business activity can also use SKD.
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