Restructuring of several loans with different banks to become simpler for borrowers
The regulator has suggested a mechanism for communication to banks in order to address the problem of borrowers facing hardships.
This mechanism is stipulated in the Standard for Protecting the Rights and Interests of Individual Borrowers in the course of debt settlement. The document was developed by the Bank of Russia’s working group for mediation that includes representatives of the banking community, the Financial Ombudsman, the Ministry of Finance of Russia, and other stakeholders.
There are a lot of borrowers who raise a consumer loan from a bank where they receive salaries and a mortgage loan — from another bank approved by the developer. In the case of financial problems, a person usually tries to repay the mortgage loan, whereas the consumer loan might become overdue. Besides, the creditors can be unaware that the borrower has two loans, or there can be a lack of mutual confidence between the two banks, or they cannot agree upon a temporary reduction in payments on both loans for the borrower to be able to service both loans. One of the banks can collect the debt through legal action, as a result of which the borrower can sometimes lose housing and become bankrupt.
The use of the Standard will help address this problem on the terms that will be acceptable for all the parties.
A borrower facing a job loss, a long illness or other hardships will be able to apply to one of the banks for comprehensive debt settlement. Submitting such an application, the borrower should specify all the banks that issued loans to him/her. These banks will be able to communicate with each other on their own pursuant to the Standard or select one of the banks as the operator that will deal with the restructuring of all the loans of the borrower.
The Standard also lists the challenging situations where banks are advised to carry out restructuring and the documents required as confirmation.
Compliance with the Standard will be voluntary at the first stage in order to accumulate sufficient experience of its use and, if needed, adjust the text. Creditors who choose to join the Standard will publish all necessary instructions for borrowers on their websites.