In 2022, the approach to calculating the full cost of a loan will be radically changed. The Central Bank believes that the bill, which will toughen the requirements, will be submitted to the State Duma in the fall session. Then it can be adopted already in the first quarter of next year., Anatoly Aksakov, head of the State Duma’s financial market committee, told Izvestia. The regulator “Izvestia” disclosed the details of the upcoming amendments: they will concern not only the principles of calculating the CPM, but also the “cooling period”, as well as the advertising of credit products. Banks and MFIs support increased transparency in lending, but warn that the change could lead to an increase in the informal sector.
The Bank of Russia, together with the Ministry of Finance and legislators, is actively working on a document clarifying the procedure for calculating the CPM, a representative of the Central Bank told Izvestia. According to him, the amendments will clarify the real costs of a citizen for servicing a loan, and also make it easier for clients to choose the best offer on the market. The regulator clarified which innovations are proposed to be introduced into the legislation:
- In addition to payments for repayment of the principal and interest, it is proposed to include any other payments of the borrower in favor of the loan and (or) third parties, if it is issued subject to the receipt and payment of additional services and this is indicated when drawing up the loan agreement. Or if, depending on the consent or refusal of these services, the conditions for issuing a consumer loan may change.
- The lender offering the borrower additional services to the agreement will also be obliged to offer an alternative loan option without these services, with the calculation of the CPM and informing the borrower about its size.
- If the consumer loan agreement provides for several interest rates that are applied depending on the behavior of the borrower (for example, if money is withdrawn from a credit card, then one rate, and if a payment is made on it, then another), it is proposed to calculate the UCI based on the maximum amount of payments possible for payment.
- It is proposed to increase the “cooling period” in relation to additional services: the borrower should be able to cancel them up to five calendar days after the date of the first payment under the loan agreement, while the minimum “cooling period” will remain 14 calendar days. This rule is proposed because it is not uncommon for a citizen to find that the cost of the loan is too high for him only when the first payment is made.
- It was proposed to amend the legislation on advertising: it will be possible to promote credit products only with a clearly visible indication of the real full cost of the loan, which is calculated according to the new rules.
Photo: Izvestia / Alexander Kazakov
The Central Bank expects that the bill will be submitted to the State Duma in the autumn session… Work in this direction is being carried out, Anatoly Aksakov, head of the State Duma committee on the financial market, confirmed to Izvestia. According to his forecasts, amendments will be adopted in the first quarter of 2022… Now some payments of borrowers, for example, insurance, are not taken into account in the PUK: as a result, the citizen pays more on the loan than he expected, the deputy said. He stressed that the CPC should reflect everything that forms the burden on the borrower.
Izvestia sent a request to the Ministry of Finance.
On guard for transparency
Approaches to calculating UCS require adjustment, the initiative is seen as an inevitable stage in market regulation, according to the bank “Zenith”. Rosbank stressed that the gradual introduction of new rules should be ensured during a certain transition period, as the changes will obviously lead to an increase in the market average values of the UCV.
– Important ensure that there are uniform approaches on the part of all market participants regarding what is considered an additional service… Otherwise, some lenders may consider certain services related to a loan and include them in an application for a loan, while others may be considered separate, which will lead to different interpretations of the law and non-transparent rules of the game, – believes the deputy director of the department of retail client solutions and digital business of Rosbank Lydia Kashirina.
The innovation will significantly limit the income of many players – especially those companies in which the profit from the sale of additional services reaches 25-30% from its total volume, Roman Makarov, CEO of MFC “Seimer” (Robocash Group) expects. He continued: also the outflow of players from the roster will accelerate, while the shadow segment is likely to grow.
On the other side, the mathematical value of the UCS, expressed with an accuracy of a thousandth of a percent, does not have an informative function for the consumer, since it does not allow us to estimate the real amount of the overpayment, according to the Eqvanta group of companies. In addition, calculating the full cost at the maximum rate will prevent lenders from offering preferential rates for certain types of loans that encourage good customer behavior.
Photo: Izvestia / Alexander Kazakov
Sberbank and VTB Izvestia were told that their loan issuance procedures are already quite transparent.
Of the proposed initiatives, the most interesting is to introduce an obligation for the lender to offer the borrower an alternative loan option without additional services, said Veniamin Kaganov, director of the Association for the Development of Financial Literacy. He added that the idea of extending the “cooling off period” on ancillary services to five days after the first installment is not a bad idea in itself. However, it is necessary that the client of the bank, firstly, have a simple convenient way to refuse additional services, and secondly, so that he knows about it.
Initiative can boost competition among banks, the analyst of the NKR rating agency Dmitry Ryshkov expects. He added that it will strengthen the effect of measures already being implemented to cool the consumer lending market, since it will directly affect the demand for loans from borrowers: they will see the real volume of overpayment.