By Yekaterina Dranitsyna
The General Prosecutor’s Office has requested that Bank Russky Standart abolish a number of practices that were found to violate consumer rights in a case that could have a dramatic impact on the banking industry. The bank has been told to stop charging accounting commissions and that it should recalculate client debt without forfeit, something that has been forcing many borrowers into a spiral of ever greater debt.
“Rustam Tariko, chairman of the board of directors of Bank Russky Standart was invited to the General Prosecutor’s Office and it was suggested that the bank stop violating customer rights,” the General Prosecutor’s Office said last week in a statement.
Following the request, Russky Standart has “abolished, from Aug. 15, 2007, monthly commissions for accounting services for all loans and the recalculation of client debt and abolished penalties for delays in payments and forfeits. It has also stopped selling the rights for debt claims to the Agency for Debt Collecting,” the statement said.
A popular advert for Russky Standart has the words: “You can get a credit card in 15 minutes in any branch. To get a card you just need a Russian passport.” Such leniency towards client creditability made Russky Standart one of the largest consumer lenders in Russia.
According to the last financial report audited by PricewaterhouseCoopers, by the end of 2006, Russky Standart’s loans and advances to customers accounted for 163.7 billion rubles. The bank earned a net interest income of 52.15 billion rubles. Annual profit was reported at 14.5 billion rubles.
In an attempt to simplify the procedures Russky Standart goes as far as sending credit cards by post, despite the fact that the clients are liable for any spending made by unauthorized persons.
In June this year the General Prosecutor’s Office claimed that Russky Standart did not inform its clients about all the commissions and fees related to loans. As a result, the actual interest rate exceeds client expectations several times over.
At a forum on www.biznet.ru one Russky Standart client posted the following comment: “I took out a loan of 25,000 rubles, and now I owe 28,000, despite the fact that I have already paid back about 10,000. My friends told me that if I keep paying 1, 500 a month I could be in debt for the rest of my life.”
Someone else said the bank accused him of delays in monthly payments. A Russky Standart representative demanded that he pay the whole debt at once, or else increase the initial debt of 78,000 rubles to 100,000 rubles.
“A month later somebody called me saying that he was in debt to a debt collecting agency. He demanded that I bring the whole sum in cash. I consulted a lawyer and sent a request to the bank saying I was being blackmailed by people I don’t know and with whom I did not sign any agreement, and I provided the police and the banking commission with copies of this letter,” the post said.
“Russky Standart is one of the leaders in consumer loans. If it’s not a political decision, we can expect smaller banks to follow their example to avoid problems with supervising bodies. Those banks that do not voluntarily come clean could face sanctions from the Central Bank,” said Georgy Pchelintsev, lawyer at Beiten Burkhardt St. Petersburg.
“Civil legislature allows debt to be sold to debt collecting agencies, unless it is prohibited by an agreement with the borrower. However it was reported in the mass media that Russky Standart worked with an affiliated debt-collecting agency and this provoked objections from the Central Bank. The Central Bank suspected Russky Standart of manipulating their financial reports,” Pchelintsev said. The public relations department at Russky Standart confirmed that accounting commissions had been abolished. As for forfeits, they can be abolished only for those borrowers who applied and get the bank’s approval to recalculate their debt.
“I’m pleased that such attention has been paid to the details of our business. Considering the importance of the issues discussed, the bank quickly changed its credit policy,” said Rustam Tariko, chairman of the board of director of Bank Russky Standart.
News source: times.spb.ru
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