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Pawnshops may not raise rates before end of loan term

21 July 2021

The Bank of Russia has identified cases when pawnshops issue loans with the condition of increasing the interest rate during the last days of the repayment period specified in the pawn ticket. By doing so, they circumvent the legally established ban on raising the rate after the loan has not been repaid on time.

In its information letter, the Bank of Russia pointed out to pawnshops that this unfair practice is unacceptable. It leads to a situation when for clients who fail to make timely payments it becomes increasingly difficult to repay the debt and get the pawned object back.

The law prohibits pawnshops from increasing the interest rate after the day of repayment of the loan specified in the contract. They may confiscate the pledged object not earlier than one month after this period.

Preview photo: H_Ko / Shutterstock / Fotodom