Court of Justice of the EU Rules: No More Interest on Costs the Borrower Never Received

For years, banks applied a mechanism that looked harmless at first glance: they added a commission, arrangement fee or insurance premium to the borrowed sum, then charged interest on the total — as if the client had actually received that money. In practice, borrowers were paying interest on funds that never reached their account. The judgment of the Court of Justice of the European Union of 23 April 2026 in case C-744/24 puts an end to this practice.

What the Court Decided — and Why It Matters

The reference was made by a Polish court hearing a dispute between a consumer and a bank. The client challenged two issues simultaneously: an opaque presentation of amounts in the contract and the charging of interest on an insurance premium he never actually received. The CJEU upheld him on the key point.

The Court drew a distinction that sounds technical but has very concrete financial consequences. Under the EU Consumer Credit Directive, “total amount of credit” and “total cost of credit” are two different concepts. Interest may be charged only on the amount actually disbursed to the consumer — not on a sum that also includes transaction costs. Banks are entitled to recover their costs, but must do so differently — for example by setting a higher interest rate on the principal itself. They may not artificially inflate the base on which interest is calculated by including items the client never saw in their account.

What This Means for Consumer Credit Holders

The scale of potential claims is substantial. The Polish Bank Association estimates that approximately 18 million consumer credit agreements have been concluded in Poland — and the described mechanism was used in many of them. The CJEU judgment opens the door to challenging such agreements and recovering amounts that were wrongly collected, including through the so-called free credit sanction (sankcja kredytu darmowego).

The free credit sanction is a specific legal remedy: if a bank violated certain statutory disclosure obligations towards the consumer, the client may submit a relevant declaration and repay only the principal — without interest, commission or any additional costs. Whatever was already paid above that amount may be reclaimed.

Caution is warranted, however, in interpreting the ruling. Banks and the Polish Bank Association point out that the CJEU did not find an automatic entitlement to the free credit sanction in every case where interest was charged on costs. Any potential claim requires individual assessment by a national court, taking into account the specific circumstances of the agreement in question.

Time Is Working Against Borrowers

The free credit sanction is not an open-ended remedy. As a rule, it may be invoked within one year of full repayment of the credit. For those who recently completed repayment, that window may be closing in the coming months.

The judgment of 23 April 2026 marks a new direction in consumer–bank disputes — much as the rulings on Swiss franc mortgages reshaped that segment of the market a few years ago.

FAQ

What does the CJEU judgment of 23 April 2026 in case C-744/24 concern? The judgment establishes that a bank may charge interest only on the amount actually disbursed to the consumer — not on a total that includes commissions, arrangement fees or insurance premiums the client never received in their account. The Court clarified that “total amount of credit” and “total cost of credit” are distinct concepts under the Consumer Credit Directive.

What is the free credit sanction and when can it be used? The free credit sanction (sankcja kredytu darmowego) is a legal remedy that allows a consumer — where the bank breached its disclosure obligations — to repay only the principal, with no interest or additional costs. Amounts already paid above the principal may be reclaimed. Invoking the sanction requires the consumer to submit a formal declaration to the bank.

Does the CJEU ruling automatically entitle me to the free credit sanction? No. The Court did not find an automatic right to the sanction in every case where interest was charged on costs. Any potential claim requires individual assessment by a national court, considering the specific circumstances of the agreement — including whether a disclosure violation actually occurred.

How long do I have to invoke the free credit sanction? As a general rule, the sanction may be invoked within one year of full repayment of the credit. If you recently finished repaying your loan, this deadline may be approaching within months — so it is worth consulting a lawyer as soon as possible.

How many consumer credit agreements in Poland may have used the practice at issue? The Polish Bank Association estimates that around 18 million consumer credit agreements have been concluded in Poland. The mechanism of charging interest on costs never paid out to borrowers was used in many of them. The CJEU ruling opens a path to challenging such agreements on a case-by-case basis.

Is this similar to the Swiss franc mortgage cases? The parallel is partial. Just as the franc mortgage rulings opened up mass litigation against banks, this judgment may trigger a new wave of consumer claims in respect of consumer credit. The legal mechanism differs, however — this concerns a breach of the Consumer Credit Directive and the free credit sanction, rather than unfair contract terms in foreign-currency mortgage agreements.

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Do you have questions about your consumer credit agreement or the potential impact of this ruling on your situation? Contact us — our team advises in English and German.

Legal basis: Judgment of the Court of Justice of the European Union of 23 April 2026, Case C-744/24; Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers; Act of 12 May 2011 on consumer credit (Journal of Laws 2022, item 246, as amended).