Bank of Russia develops approaches to regulating instalment plans
In this case, individuals buy on credit but, unlike borrowers of banks or microfinance organisations, their protection is somewhat limited. For instance, they do not have information either on the terms and conditions of agreements, or the cost of instalment plan, or extra costs they may incur. They may be unaware either of high late payment charges or be unable to restructure their debt.
Having analysed global BNPL practices, the Bank of Russia suggests aligning laws on consumer lending with those on instalment plans to solve the said problems. In particular, the regulator proposes to set requirements for informing consumers and for the contents of agreements, to restrict late payment charges, and to enable buyers to disallow the assignment of claims. The Bank of Russia proposes to prohibit sellers from setting different prices for goods to be paid for under instalment plans and oblige sellers to disclose the cost of such plans so that consumers realise that their instalment plans are not free of charge. Also, it appears necessary to consider the ways to cap the cost of instalment plans.
Besides, the regulator believes that buyers should be able to cancel their instalment plans and return the goods within a certain cooling-off period and to settle their obligations under the instalment plans ahead of schedule in accordance with a procedure known in advance.
The regulator finds it important that information on instalment plans be sent to credit history bureaus. Now, the absence of such data prevents banks from properly assessing debt burdens and repayment ability of potential borrowers.
The Bank of Russia has discussed the above approaches with a special focus group of representatives of banks and companies offering instalment plans. The discussion of the regulation approaches will continue. It is planned to draft amendments to the law as soon as the approaches are coordinated with all stakeholders.
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