Banks are required to provide detailed information about the cost of loans: what’s the catch?

From October 23, Russian banks are required to indicate in advertising their products the range of the total cost of the loan (FLC) as a percentage per annum and additional conditions. This follows from the provisions of the law that have entered into force. Full information about the loan now needs to be displayed in the same font as the most attractive interest rates. At the same time, some parameters should not be less significant than others. But will the new measures protect Russians from being misled by banks?

As noted by the Bank of Russia, the law that has come into force prohibits credit institutions from displaying only attractive interest rates in text advertising messages, including on the website and in applications, as well as in advertising with sound. It is assumed that the consumer will thus be able to immediately see what additional paid goods or services he will have to purchase in order to receive borrowed funds at a more favorable rate.

The new legal norm should force borrowers to more consciously calculate their financial burden. According to one of the authors of the bill, head of the State Duma Committee on the Financial Market, Anatoly Aksakov. The law that came into force obliges banks to inform potential clients about the maximum amount of payments, and such a measure will protect borrowers from overpayments and surprises indicated in the fine print.

Previously, banks did not strive to indicate all the information about them in advertising their products, highlighting only attractive parameters in a special way. For example, only the low rate was indicated, and accompanying payments that increased the amount of debt were kept silent or indicated in small print.

According to the deputy, such presentation of information could mislead the client regarding the real amount that he will have to pay. “We have tried to simplify and improve as much as possible the receipt of complete information about the provision of a loan product,” Aksakov emphasized, expressing confidence that this law will bring order to the market.

However, independent experts disagreed on whether the initiative would achieve its goal. “Of course, with the introduction of the new law, borrowers will be protected to a greater extent than before,” says lawyer Vadim Tkachenko. — It will no longer be possible to deceive the client with “attractive” rates. The requirements include such parameters as the same font for all loans and borrowings, and not just those that the bank intends to “highlight” and make more attractive to the client. Or prescribe a “pleasant” interest rate for the first month, keeping silent about its sharp increase in the future.”

Borrowers will be able to familiarize themselves with all additional conditions, such as compulsory insurance or commissions, and then consciously choose the cost of the loan and calculate their financial burden, the expert noted.

According to Maxim Ali, a partner in Comply’s intellectual property practice, the authors of the amendments were clearly trying to make it more difficult for banks to circumvent the new requirements requiring them to indicate the percentage range of the total cost of the loan. It is important to note that this is not only about advertising, but also about information on the official website, as well as in the offices of financial organizations. In addition, the rules for determining the UCI themselves have been tightened in order to reduce the risks of abuse in its calculation.

“Most banks already indicated all the lending conditions,” an associate professor of the Department of World Financial Markets and Fintech of the Russian Economic University named after A. Plekhanov Denis Perepelitsa. The innovation will not greatly affect the work of the largest market players, but it may probably somewhat complicate the activities of small banks that have not previously published the PSC. However, such people are in the minority, the economist emphasized.

According to Dmitry Yanin, Chairman of the Board of the International Confederation of Consumer Societies (ConfOP), the law does not solve the problem of imposing additional services on the borrower. If the Bank of Russia really wanted to close the issue, it would at one time have supported the idea of ​​a complete ban on the sale to borrowers of any services that currently accompany the issuance of a loan, and would have punished those players who break the high cost of a loan into several products, including in their margin not only the interest rate on the loan, but also the price of supposedly voluntary additional services provided by intermediaries.

It turns out that the regulator once again insists that the main thing is simply to inform the consumer of the cost of these services, and not to protect the borrower from their imposition. As for awareness, it will not stop people who are in dire need of money. As Tkachenko noted, there are often cases when borrowers need funds so much that they are ready to sign any documents just to get the money.