Bank Code amendments containing a number of key novelties pertaining to natural persons’ loans and deposits are effective as from today.
Olga Polozova, REVERA’s senior attorney, has analysed the key novelties and has outlined the TOP amendments pertaining to loan granting.
1. Rate formation and no unilateral change.
The redrafted Bank Code provides two types of lending rates, subject to different formation patterns:
1) fixed annual percentage rate, determined as numerical expression, for instance – 15%, or
2) variable annual percentage rate, determined on the basis of a calculated value pegged to a basic index – Belarusian National Bank’s refinancing or another market index agreed upon by the parties of the loan agreement. Such basic index reflects the costs of lent resources in bank’s eyesight, while the derived calculated value (also known as the ‘margin’) reflects bank’s ‘earnings’. Such rate will be formulated, for instance, as RR+3%.
However, the new Code provides a strict prohibition for any unilateral increase in credit rates by a bank. Accordingly, a fixed rate will remain unaltered during the entire term of the loan agreement, while a variable rate may vary (upwards or downwards) subject to any alterations of the basic index.
2. No restrictions in selecting related services providers; no overselling of ancillary services
Where loan granting is subject to pledging of collateral (for instance, pledging of a car were such car is bought on credit), a bank may not impose any particular providers of collateral-related services (such as insurers or evaluators). Until today, many banks would provide exhaustive lists of insurers or evaluators to their clients. Since October 29, 2018 such actions are illegal.
Also, borrowers may reject any additional fee-based services offered by a bank (such as SMS-notifications or automatic debiting). Where a borrower rejects any additional fee-based services offered in conjunction with a loan agreement, such borrower shall be provided with an alternative choice of loan arrangement (identical in terms of amount and time frames), without additional fee-based services offered.
3. Preschedule repayment of credit
Until now, borrowers were only able to make advanced repayments of their loans upon consent of the bank. Moreover, banks could impose penalties for advanced repayments. However, the redrafted Code prescribes that borrowers are entitled to advanced repayments of their consumer loans, paying interest for the actual loan disbursement period only, without loan provider’s sanction and even without noticing the loan provider. Also, loan providers may not impose penalties or fines in case of prior repayment.
4. Informing clients on amount dues and arrears
A number of headline-making cases featured one pressing problem: a client was assuming that he had repaid the debt, but a minor shortfall left later transformed into a huge debt to be communicated to such clients only years after. This problem has also been solved by the redrafted Bank Code.
From now, any natural person may make (once a month) a free-of-charge inquiry, in particular via a remote banking system, for the information on such person’s principal, interest charged, arrears, penalties and other obligations (if any).
Moreover, banks must provide free-of-charge notifications, in particular via a remote banking system, of any existing arrear of a borrower (not later than 30 days after such arrear has emerged), or of a guarantor (not later than 60 days after such arrear has emerged).
5. Limiting commissions
The Code makes further progress in implementing the principle of restricting bank commission margins. Thus, the Code prohibits to charge for the following:
– any information on credit conditions and loan application processing (processing of other loan-related documents);
– opening a current bank account and remitting loan amount to it, where the loan agreement provides for such opening.
Moreover, a loan agreement must provide at least one free-of-charge option for repaying natural person’s loan.