Permanent mechanism established to provide payment holidays on consumer loans
The State Duma adopted a law that allows for the suspension of loan payments in two cases. First, if the borrower’s income has decreased by more than 30% compared to the average of the previous year. Second, if the borrower has been affected by an emergency such as accident, disaster, natural calamity, or other adversities.
The law is set to be effective from 1 January 2024. Each borrower will be eligible for a grace period once due to a decline in income and once due to an emergency. The exercise of this right will not be affected by any prior loan delinquencies.
It is not allowed to request payment holidays on loans for which such holidays were granted under anti-crisis law No.
A borrower must collect and provide their lender, such as a bank or microfinance organisation, with the necessary documents to prove their eligibility for loan payment holidays. The grace period can last up to six months, and a borrower has the right to resume loan payments at any time during this period.
The government will establish maximum limits for consumer loans eligible for payment holidays. Until then, the following limits will apply: ₽1.6 million for car loans, ₽450,000 for other loans, and ₽150,000 for credit cards. These amounts exceed both the limits set for anti-crisis loan payment holidays and the average amounts of currently granted loans.
During the grace period, no penalties will be imposed and creditors will not be entitled to seize collateral or approach guarantors for payment. However, interest will continue to accrue in full and will have to be paid at the end of the loan term in the same instalments as originally specified in the loan agreement. The only exception is that credit card holders may repay the interest accrued during the holidays in equal instalments every 30 days over a period of two years.
Information about the payment holidays will be recorded in the borrower’s credit history but will not have a negative impact on it.
‘Participating in the development of the new law, we took into account the lessons learned from both the anti-crisis and mortgage payment holidays, which have already provided relief to hundreds of thousands of people, helping them overcome temporary difficulties’, emphasised Mikhail Mamuta, Head of the Bank of Russia’s Service for Customer Protection and Financial Inclusion. ‘Moreover, we note that restructuring under banks’ own programmes significantly exceeds the amount of relief required by the new law. This indicates that the financial market has come to understand the importance of preventing borrower defaults and the need to help them get back on track with payments. In doing so, banks retain loyal customers and increase their attractiveness in the eyes of people.’