Increasing the credit limit only by consent: the State Duma intends to rein in banks

Expert Sidorov: “Clients unwittingly take on more debt without realizing the consequences”

In Russia, banks may be prohibited from increasing the limit on credit cards without the consent of the consumer and the execution of a new agreement. The State Duma adopted the corresponding bill in the first reading. The author of the amendments is convinced that it is this banking option that leads to an increase in the debt burden of borrowers. MK was looking into whether the document would be supported and how it could affect the problem of the population’s debt burden.

The bill, which prohibits banks from increasing the limit on bank cards without the consent of the borrower and the conclusion of a new agreement, was adopted by the State Duma in the first reading. Nowadays, banks often include in individual lending conditions provisions for changing the credit limit at the initiative of the bank, unilaterally. First Deputy Chairman of the State Duma Committee on the Financial Market Konstantin Bakharev emphasizes that if the law is adopted, banks will not be able to include in the terms of the agreement the ability to increase the lending limit without the consent of the borrower.

Currently, financial institutions can include provisions in the contract that allow them to change the credit limit on their own initiative without the client's consent. The borrower may not even think about increasing this limit, and still start spending more money since it appeared on his card.

All this can lead to over-indebtedness of citizens and financial problems. According to a private investor, founder of the School of Practical Investing, Fedor Sidorov, sometimes banks want to increase their income from interest on loans by increasing the same credit limit.

“The State Duma adopted in the first reading a bill that prohibits banks from increasing the limit on bank cards without the consent of the borrower and the conclusion of a new agreement. This has its advantage: the law helps prevent situations where clients unwittingly over-borrow without realizing the increase in the credit limit. At the same time, the implementation of the law may create some difficulties for banks and require changes in their systems and processes, notes MK’s interlocutor. –The bill is aimed at protecting the rights of borrowers, which is an important social issue. Therefore, most likely the State Duma can support it in order to reduce the risks of over-leveraging the population.”