Russian banks continue to hide real rates: “greedy interest”
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Domestic banks are still making good money on the poor knowledge of borrowers and hide the real rates from them in commissions and other types of hidden fees. The Bank of Russia sees the problem and has several times, together with the Federal Antimonopoly Service (FAS), recommended that its wards openly provide information about the terms of loans. But the credit “wagon” is still there, so the regulator intends to tighten the law, said Elvira Nabiullina, head of the Central Bank of the Russian Federation, speaking in the Federation Council. About what the authorities can do and how borrowers should behave before the introduction of new requirements – in the material “MK”.
Russian banks manage to hide the real size of lending rates through the use of commissions and additional financial products. As a result, Russians do not understand at what real interest they are actually offered money. “So far, we have given banks recommendations on how to disclose information about a loan, but, of course, tougher measures are needed,” the head of the Bank of Russia said. “Changes to the law, requirements for advertising such loans in order not to mislead people.”
At the beginning of June, the Kommersant business newspaper analyzed the difference between offered and real lending rates in banks. It turned out that cash loans were formally announced by financial organizations at 3-4% per annum, but the real rates on these products sometimes even exceeded 30%.
Regulators are trying not only in word, but also in deed to reason with the wards. For example, in May, the FAS fined a bank with a pale blue logo for a television advertisement for a loan that allegedly lowered the rate, but the conditions for receiving it were reported in very small print. But this episode did not impress the market.
According to the Chairman of the Board of the International Confederation of Consumer Societies Dmitry Yanin, there is no need to reinvent the wheel, but the very law banning the sale of additional products along with a loan that has already been submitted to the State Duma should be adopted. The human rights activist claims that hidden fees from borrowers for services imposed along with loans can amount to 30-40% of the cost of the loan itself.
Head of the law firm “Kachai Prava!” Dmitry Osipov agreed with the expert’s opinion that, in fact, only the law will make it possible to further tighten the requirements for the form of contracts and the content of advertising, since the stated for informational purposes and real interest rates on loans often differ significantly.
In the light of technological development, it is also possible to use an official calculator or bot, into which the borrower at the time of conclusion of the agreement could enter the data of interest to him, and the answer of the information system with the calculation would be an official annex to the loan agreement. In other words, partly through “gamification”, the client would receive a printout of the conditions “How do I plan to repay the loan and how much it will actually cost”, which would take into account all regular payments both on the loan and as part of additional “fees”.
An effective measure can also be a change in judicial practice. In the event of disputes, the courts must not only formally interpret the contract on the basis of the principle “you read what you signed”, but also find out for what reasons the borrower believed the conditions were different than they actually are, and whether these reasons are worthy of attention, whether the client was provided with all the necessary information in the proper form, whether he personally signed additional applications with a full description of the financial burden. With this approach, it may turn out that contracts in many cases should be revised and made more understandable.
And even if the practice develops against borrowers, the presence of a large number of disputes with the same bank should force the regulatory authorities and the financial commissioner to study more carefully what is their reason and whether it is worth giving an individual instruction on the need to refine the forms of contracts and bring information to consumers.
There is only one official advice for borrowers from a lawyer: to thoroughly study the agreement with the bank and not to trust tempting advertising. “In the event of a dispute with the bank, it is quite difficult to prove that you were not familiar with the full terms of the loan, if there is an agreement,” the expert emphasized.
Particular attention should be paid to those points where numbers and interest rates appear. Do not be shy to ask questions to the manager if the signing takes place in the office, and to the operator, if remotely. If something is not clear, it is worth clarifying several times.
“You can record conversations with bank employees when they give explanations on the terms of the loan agreement,” Osipov advised. “In case of further disputes, the availability of such audio or video evidence will help to talk about misleading the borrower.”
When taking a loan with a base rate, for example, 20% and with a promotional rate, for example, 10%, it is necessary to study in the utmost detail the conditions under which the promotion works. If the bank refuses to provide the terms of the promotion in writing and issue a certified copy to the client, then it is better to either refuse to cooperate with such a bank or certify the terms of the promotion set out on the website with a notary, but this procedure costs a lot of money.
With regard to interest that is hidden in commissions, insurance and services, you need to check with the bank whether it is possible to refuse additional fees. Often, in fact, such surcharges are voluntary, and bank employees admit to meticulous customers that surcharges can be waived without worsening other conditions on the loan.
At the same time, it is also worth studying the contract and finding out whether it is possible to avoid additional payments, even if they are provided for in the contract. For example, if a bank has set a commission for transferring funds to another bank, the possibility of a cheaper or even free withdrawal from an account at a bank branch can be agreed, or if there is a fee for SMS alerts, this service can be painlessly disabled after the first month of using the loan, noted expert.
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