New rules for issuing consumer loans come into force in July 2014

In July 2014, the new Federal Law “On Consumer Credit (Loan)” will come into force. Under the new Law, the borrower will have the right to receive detailed information on the conditions for the provision, use and repayment of the loan. This information will have to be posted at the places where loan applications are received.

Thus, lenders’ clients will have the right to receive free information on the conditions for granting and repaying a loan, including the name of the lender, requirements for the borrower, loan currency, interest rates and methods of loan repayment.

In addition, the Law provides that the Bank of Russia may limit the cost of loans and borrowings if it exceeds the market average by more than one third. To calculate average prices, the Central Bank will have to determine the average loan value of at least one hundred of the largest lenders.

In accordance with the Law, the Bank of Russia will be obliged to calculate the average market value of the total cost of a consumer loan every quarter and publish this information no later than 45 days before the start of the quarter in which the value of the value is to be applied.

The Bank of Russia will begin disseminating this information in mid-November 2014.

According to the Law, borrowers will have the right to refuse to receive a loan and to repay it early. It will be possible to refuse the loan before the loan is provided by notifying the lender.

Also, the borrower will be able to return the entire amount within 14 calendar days (for targeted loans – 30) after receiving the money, without notifying the lender in advance and paying only interest for the time of actual use of the money. In other cases, it will be possible to return the full loan amount, also by paying interest and notifying the lender about this at least 30 days before repayment. However, the contract may provide for a shorter period.

There will be no penalties for early loan repayment.

According to the Law, the lender will be able to demand early repayment of the loan with interest payment only if the borrowers are late in payments by more than 60 calendar days during the last 180 calendar days.
The most important, according to lawyers of the law firm “Rezolut”, the changes will affect the permissible ways of interaction between the creditor and the debtor or the person who provided security under the agreement (the surety), as well as the intensity of such interaction.

In particular, it has been established that when taking actions aimed at recovering a debt, a creditor or a person carrying out activities to recover a debt (for example, an employee of a collection agency) will have the right to use:
1) personal meetings, telephone conversations (direct interaction);
2) postal items at the place of residence of the borrower or guarantor, telegraph messages, text, voice and other messages transmitted over telecommunication networks, including mobile radiotelephone communication.

And other methods of interaction at the initiative of the lender and (or) collection agency can be used only with the written consent of the borrower (guarantor).

The new Law prohibits direct interaction with the borrower or the guarantor if the deadline for the fulfillment of the obligation under the contract has not come.

Also, personal meetings, telephone conversations and SMS messages will be prohibited on weekdays from 10 pm to 8 pm, as well as on weekends and public holidays from 8 pm to 9 am local time at the place of residence of the borrower or guarantor.