Late fees should not exceed statutory penalties
The amount of late fees — fines for delay in loan repayments — may not exceed the statutory penalty amount, reminds the Bank of Russia in its Information Letter.
In the course of conduct supervision, the regulator found some creditors’ business practices to be unfair: they charged borrowers other payments for overdue debt, one-off or periodical, in addition to the late fee. This as a rule led to the debtor’s total liability exceeding penalty caps established by law.
The payment of a penalty following the debtor’s failure to perform or improper performance of obligations must be formalised in a loan agreement and recorded in line 12 of the table outlining individual terms of the agreement. The penalty amount may not exceed 20% p.a. or 0.1% for each day of delay (depending on whether interest is charged or not on the amount of debt for the period of default). However, in either case the basis for calculating such a payment is the overdue amount of debt and interest, not the whole balance of a loan, the regulator reminds.