Regulator changes rules for calculating total cost of loan and rejecting paid services

The law expands the list of borrower payments that banks and microfinance organisations shall include in the TCL calculation. The law refers not only to payments stipulated in loan agreements but also to other payments on which loan conditions actually depend, such as interest rates, loan tenors, etc. In particular, this may refer to life and health insurance, where the beneficiary is the borrower, or insurance of a vehicle used as collateral on a loan.

Generally, the TCL will be calculated based on the maximum possible amount of payments if they depend on the borrower’s behaviour, for example, on payments for some services or compliance with certain conditions. The law provides for exceptions to this rule. For example, two TCLs should be calculated for credit cards based on the minimum and maximum rates and communicated to the borrower. These rates are usually applied depending on whether a cardholder uses his/her card for purchases or cash withdrawals.

The law mitigates the risk of imposing additional services and provides more opportunities to reject them. A lender will have to send a notice to a borrower with the list of services to which the borrower has consented and a deadline for refusal. This deadline is more than doubled from 14 to 30 days. Services unrelated to a loan but sold with it shall be documented in a separate application form. Refund policies for services also apply to goods and works.

The law prohibits unfair advertising of loans where lenders attract customers by low interest rates but obfuscate the conditions of such rates. To stop this practice, the law makes it mandatory for lenders to print the range of TCL values next to the interest rates and in the same font in advertising materials, websites, mobile apps, and offices.

Most provisions of the law will come into effect 180 days after publication, while the advertising provision will become effective 90 days after publication.