08 January 2017, 23:23 / Finance

Interest on microloans from January cannot exceed the amount of debt more than three times

The Central Bank warned about limiting rates for microfinance organizations Anna Eremina

Interest on microloans from January cannot exceed the amount of debt by more than three times - the Central Bank warned about limiting the rate for microfinance organizations / M. Stulov / Vedomosti

From January 1, 2017, interest accrued by microfinance organizations (MFOs) under a consumer microloan agreement cannot exceed three times the amount of the debt, the Central Bank warned. This applies to contracts concluded starting from this year, as well as if the return period under the contract does not exceed one year. The law also obliges each MFO to place information about restrictions on the first page of the consumer loan agreement before the table with the individual terms of the agreement.

For example, with a loan of 5,000 rubles. The borrower's debt at no time can exceed 20,000 rubles, the regulator said in a statement. This amount includes a loan amount of RUB 5,000. and accrued interest in the amount of RUB 15,000. However, this rule does not apply to fines and penalties, as well as to payments for services provided to the borrower for a fee.

Restrictions on the accrual of interest were introduced in March 2016 - then they could not exceed four times the loan amount. First Deputy Chairman of the Central Bank Sergei Shvetsov pointed out that this should not put significant pressure on the business of bona fide market participants. He promised that the Central Bank would analyze how the companies’ business would change, and after that “it will be possible to make a decision to reduce this figure by half again.

Another restriction, which comes into force on January 1, concerns late payments on a short-term (up to one year) microloan, the Central Bank indicates: after a delay occurs, the MFO can accrue interest to the debtor only on the remaining portion of the principal amount, but the accrual will stop as soon as the interest reaches twice this amount.

Payday rate

According to the Central Bank, the average market total cost of a microloan is up to 30,000 rubles. for a period of up to 30 days in the third quarter of 2016 was 596% per annum, from 31 to 60 days - 310% per annum, and over 365 days - 55.7%. The average microloan amount to individuals at the end of the third quarter was 9,200 rubles.

The law is aimed at limiting the appetites of individual players in the microfinance market, who did not care too much about building a strategy for long-term work in the market, says MoneyMan CEO Boris Batin. In general, the market was ready for the restrictions to become stricter, but the profitability of some participants would still decrease, especially those who hold heavily overdue loans on their balance sheets, accruing interest and hoping to collect the full amount, warns Deputy Director of SRO Mir Andrey Paranich. However, he said, market leaders tend to write off debt that is 90 days or more past due because it reduces profits. Most companies sell debts to collectors after the delinquency exceeds 90 days, confirms Bystrodeneg CEO Yuriy Provkin; it is not profitable to accrue interest any further - tax is paid based on the accrued interest, and not the actual income received. The restrictions, according to Paranic, apply to loans up to one year, since that is where the rates are high (see sidebar).

This is a significant limitation for the market; the profitability of some companies could be reduced by 30%, Provkin believes. The restriction will reduce interest income, but will allow borrowers not to find themselves in a situation where the debt becomes disproportionate to the original loan amount, says a representative of the company PAY PS (MFO, issues loans online), which means that the likelihood of repayment of even old debts increases.