Bank of Russia reveals drawbacks in how creditors grant loan repayment holidays to households
The percentage of applications for loan repayment holidays and loan restructuring approved by banks and microfinance organisations is continuously growing, and the majority of creditors are responsibly tackling this task. However, a number of them treat borrowers unfairly. The Bank of Russia has sent an information letter to remind creditors that they may not use unfair practices and should enhance their procedures for notifying borrowers.
According to conduct supervision data, a range of creditors do not provide sufficiently precise information to individuals on the procedure and conditions for obtaining loan repayment holidays, and offer their own less advantageous loan restructuring programmes to eligible borrowers totally conforming to the criteria established by law.
Not all individuals comprehend the difference between law-based loan repayment holidays and loan restructuring under creditors’ in-house programmes, while creditors fail to properly explain all the specifics to borrowers. A number of financial institutions do not disclose information on various loan restructuring options on their websites at all, or publish it so as to make it hard for clients to find relevant data.
The Bank of Russia has also revealed cases when banks invited borrowers to offices to submit documents, refusing to accept requests for loan repayment holidays remotely and thus disrespecting the law and the Bank of Russia’s recommendations.
The Bank of Russia has recommended that creditors inform borrowers using any means available about all existing restructuring options and about the procedure for interest accrual and resumption of scheduled payments, all the rules and specifics of obtaining various types of loan repayment holidays, deferrals, and preferential terms. In its information letter, the Bank of Russia notifies creditors that borrowers should be aware of the difference between various loan restructuring alternatives, and creditors are obliged to record clients’ decision regarding the selected restructuring option.