The clients of Russian banks say they run into roadblocks nearly all the way through choosing and signing their loans.
One of the biggest problems is to get hold of a preliminary calculation of your loan payments before signing the deal, the International Confederation of Consumer Societies (ConfOP) found out. This makes it much harder for Russians to compare the terms at different banks and realistically evaluate their own repayment capabilities.
Banks continue doing this despite the fact that the vast majority of borrowers in the country have unsecured loans. And as of July 1, 2019, the share of overdue and bad loans in banks’ portfolios exceeded 10% (Bank of Russia data).
According to ConfOP, only 10 out of 19 banks would readily provide a customer with their mortgage payments plan, and 8 out of 17, with a similar calculation on their consumer loan. It is even more difficult to find out the size of payments from bank websites, which do not contain information on the maximum consumer loan rates or the range of available mortgage rates. As many as 19 of 26 bank websites do not even specify the interest rate on the credit cards page.
Furthermore, banks often include illegal and unfair penalties and commissions in loan agreements, ConfOP notes; imposed borrower insurance also remains a problem.
“A consumer who comes to a bank to get a loan has practically no chance of getting out of it without an insurance policy,” the organization said.
Moreover, the amount of insurance is often included in the body of the loan, which means that the borrower also pays interest on it.
Overall, the ConfOP study canvassed the largest banks in 16 regions of Russia. The project involved mystery shoppers who studied their offers including mortgage loans, credit cards and cash loans. They also monitored the websites of financial institutions and the services provided at their branch offices.
The study on The State of Consumer Protection in the Credit Services Market in Russia is supported by the All-Russia Civil Forum and is carried out as part of a joint project between the Russian Finance Ministry and World Bank to improve financial education and financial literacy in Russia.