The essential terms of the loan agreement include, in particular, the interest rate on the loan. Its size and procedure for determining it, including depending on changes in the conditions provided for in the loan agreement, are usually established by the creditor bank by agreement with the borrower (clause 1 of article 819 of the Civil Code of the Russian Federation; part 1 of article 29, part 2 Article 30 of the Law of December 2, 1990 N 395-1; clause 4 of Part 9 of Article 5 of the Law of December 21, 2013 N 353-FZ).
In this material we will look at the interest rate limitation under a consumer loan agreement. Please note that the above applies equally to interest on consumer loan agreements, except for the provisions that are specifically stated in the material.
Interest rate on consumer loan
The interest rate under a consumer loan agreement is determined using one of the rates (Part 1, Article 9 of Law No. 353-FZ):
- fixed rate;
- a variable rate, the value of which changes depending on the change in the variable amount provided for in the contract.
Under a loan agreement concluded with a citizen borrower, the lender, as a rule, cannot unilaterally shorten the term of this agreement, increase the amount of interest or change the procedure for determining it. In terms of consumer loans, the bank has the right only to unilaterally reduce the constant interest rate (Part 4, Article 29 of Law No. 395-1; Part 16, Article 5 of Law No. 353-FZ).
A consumer loan agreement, which provides for the obligatory conclusion by the borrower of an insurance agreement, may contain a condition on the right of the lender, in the event of the borrower’s failure to fulfill this obligation for more than 30 calendar days, to decide to increase the interest rate on the loan issued. In such circumstances, the increase in the rate is limited to the level of the rate at the time of concluding an agreement on similar loan agreements, but without the mandatory conclusion of an insurance contract, as well as the rate at the time the creditor makes a decision to increase its size (Part 11, Article 7 of Law No. 353-FZ).
Limitation on the interest rate on a consumer loan
The legislation establishes a limit on the total cost of a consumer loan (hereinafter referred to as the CLC), which affects the interest rate on it. Thus, at the time of conclusion of the agreement, the PSC cannot exceed by more than 1/3 its average market value calculated by the Bank of Russia for the corresponding calendar quarter. In the event of a significant change in market conditions, the Bank of Russia may establish a period during which this restriction is not applicable (Part 11, Article 6 of Law No. 353-FZ).
Note. The Bank of Russia quarterly calculates the average market value of the PSC as a weighted average of at least one hundred largest lenders for a certain loan category or for at least 1/3 of the total number of lenders providing a certain loan category ( Part 10 Art. 6 of Law No. 353-FZ).
The average market value of the PSC is published by the Bank of Russia quarterly. Thus, under consumer loan agreements concluded in the second quarter of 2017 by credit institutions for the purchase of cars with mileage from 0 to 1,000 km (with the car as collateral), this value is 15.768%, and the maximum value of the PSK is 21.024% (Part 8 Article 6 of Law No. 353-FZ; Information from the Bank of Russia “On the average market values of the total cost of a consumer loan (loan)”).
Interest rate on a microloan agreement concluded with a microfinance organization
Let us note a feature regarding interest on microloans provided not by a bank, but by a microfinance organization (hereinafter referred to as the MFO).
If a short-term (up to a year) consumer microloan agreement has been concluded with a microfinance organization since 01/01/2017, the amount of interest on it is limited to three times the loan amount. For agreements concluded between 03/29/2016 and 12/31/2016, such a prohibition applies if the amount of accrued interest and other payments under the agreement (except for penalties and fees for additional services) is four times the loan amount (clause 9, part 1 Article 12 of the Law of July 2, 2010 N 151-FZ; Part 7 of Article 22 of the Law of July 3, 2016 N 230-FZ;
Not all loans and credit are created equal. Understanding the principles for calculating monthly loan payments, including the total amount of interest that you will ultimately have to pay for using borrowed funds, is very useful in choosing the loan terms that are ideal for you. Calculating the exact amount requires some calculations using a fairly complex formula, but this process can be simplified if you use the functionality of Excel.
Steps
Studying basic information about the planned loan
- upon annual accrual- 110,412.17 rubles;
- when billed monthly- 110512.24 rubles;
- with daily accrual- 110521.28 rub.
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Use longer loan terms to pay lower amounts each month, with the expectation that you'll end up paying more in the end. The loan term determines the period during which you agree to repay the loan. Again, loan terms depend on the specific types of loans, and you should choose a loan option for yourself where the repayment terms will suit your needs. If you are not sure that you will be able to pay off a shorter-term loan with a higher monthly payment amount, you can always choose a longer-term loan with lower monthly payments, but a larger total amount. A longer loan term usually means an increase in the total amount of interest paid, but allows for lower monthly loan payments. Let's say that you take out a car loan in the amount of 200,000 rubles at 5% per annum. The amount of monthly annuity payments for different loan terms will be as follows:
Manual calculation of interest payments
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Learn the formula for calculating compound interest. Despite the availability of a huge number of online calculators for calculating payments and interest on loans, understanding the principle of these calculations plays an important role in making an informed decision on the loan. To calculate payments and interest on a loan, you need to use a mathematical formula that looks like this: Payment = Principal loan amount ∗ i (1 + i) n (1 + i) n − 1 (\displaystyle (\text(Payment))=(\text(Principal loan amount))*(\frac (i(1+ i)^(n))((1+i)^(n)-1))) ,
- where "i" represents the interest rate and "n" is the number of loan payments.
- Like most other financial formulas, this formula only looks so intimidating on the surface, but in fact the calculations for it are not so complicated. Once you understand how to plug your data into the formula, actually calculating your monthly payments will be a piece of cake.
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Adjust your interest rate to the frequency of your loan payments. Before substituting numbers into the formula, adjust the interest rate “i” to the frequency of loan payments.
Determine the total number of loan payments. To find out what number to substitute for “n” in the formula, you need to calculate the total number of loan payments that you will need to make over the entire loan term.
Calculate the amount of the monthly annuity payment. To find out the monthly loan payment, all you have to do is plug the data into the formula. The upcoming calculations may seem complicated, but if you act step by step, you will quickly cope with the calculations and find out the result. Below are step-by-step calculations of the monthly payment amount for the above example.
- Continuing the example mentioned above, let’s assume that the initial loan amount is 100,000 rubles. In this case, the formula with the substituted data will look like this: 100000 ∗ 0 , 00375 (1 + 0 , 00375) 3 60 (1 + 0 , 00375) 3 60 − 1 (\displaystyle 100000*(\frac (0.00375(1+0.00375)^(3)60) ((1+0.00375)^(3)60-1)))
- 100000 ∗ 0 , 00375 (1 , 00375) 3 60 (1 + 0 , 00375) 3 60 − 1 (\displaystyle 100000*(\frac (0.00375(1.00375)^(3)60)((1+ 0.00375)^(3)60-1)))
- 100000 ∗ 0 , 00375 (3 , 84769....) (1 + 0 , 00375) 3 60 − 1 (\displaystyle 100000*(\frac (0.00375(3.84769....))((1 +0.00375)^(3)60-1)))
- 100000 ∗ 0 , 01442..... (1 + 0 , 00375) 3 60 − 1 (\displaystyle 100000*(\frac (0.01442.....)((1+0.00375)^(3 )60-1)))
- 100000 ∗ 0 , 01442..... (1 , 00375) 3 60 − 1 (\displaystyle 100000*(\frac (0.01442.....)((1.00375)^(3)60-1 )))
- 100000 ∗ 0 , 01442..... 3 , 84769..... − 1 (\displaystyle 100000*(\frac (0.01442.....)(3.84769.....-1) ))
- 100000 ∗ 0 , 01442..... 2 , 84769..... (\displaystyle 100000*(\frac (0.01442.....)(2.84769.....)))
- 100000 ∗ 0.00506685..... = 506.69 (\displaystyle 100000*0.00506685.....=506.69)
- RUB 506.69- This is your monthly loan payment.
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Calculate the total interest on the loan. Now that you know the amount of monthly payments, you can find out the amount of interest you will need to pay over the entire life of the loan. Multiply the total number of payments by the monthly payment amount. Then subtract the original loan amount from the result.
- Using the above example, you would multiply 506.69 by 360 and you would get 182408 rubles. This is the total amount of payments on the loan over its entire term.
- Subtract the original 100,000 rubles of the loan from this amount, and you are left with 82408 rubles. The last value reflects the amount of interest you will need to pay for using the loan.
Calculate interest payments using Excel
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Enter the loan principal, term, and interest rate in one column in an Excel spreadsheet. If you enter information about the loan amount, loan term and interest rate into separate cells in the Excel table, the program will help you make further calculations of monthly payments. Further in the text, for convenience, the following example will be considered.
- The loan amount is 100,000 rubles. The loan term is 30 years, and the annual interest rate is 4.5%.
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Enter the original loan amount with a minus. Excel should treat this figure as your debt. To do this, it should be made negative and, except for the minus and the numbers themselves, no longer enter any signs indicating the currency.
- -100000 - principal amount of the loan.
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Indicate the number of loan payments. If you wish, you can specify the loan term in years without converting it to the number of months, but then the calculation will be made based on annual interest accrual, not monthly. And since loans are typically paid off monthly, you need to multiply the loan term by 12 months to calculate the total number of monthly payments. Record the result in the cell below.
- -100000 - principal amount of the loan.
- 360 - number of loan payments.
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Convert the interest rate according to the number of loan payments per year. In this example, we know the annual interest rate, which applies to the whole year. However, loan payments must be made monthly, so you need to find out the monthly interest rate. Since the 4.5% rate equals 12 months, simply divide it by 12 to calculate the monthly interest rate. Once you've completed your calculations, be sure to express the percentages as a decimal.
Use the "=PLT()" function to calculate annuity payments on a loan. Excel contains a ready-made formula for calculating monthly interest payments on a loan. To carry out calculations, you only need to insert your data into it. Click on an empty table cell, then find the formula bar to manually enter a formula into the cell. It is located on the toolbar directly above the table to the right of the button labeled "fx". Click on the line and start typing the function into it "=PLT("
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Enter the function arguments in the correct order. In parentheses, indicate the data necessary to calculate annuity payments, separating them with semicolons. In the example above, after the function name, you need to enter the following: "(interest rate; number of periods; initial loan amount; 0)".
- For the example above, the complete cell entry should look like this: "=PLT(0.00375;360;-100000;0)".
- The last argument must be zero. It says that by the end of all payments the settlement balance should be zero.
- Don't forget to close the parentheses after entering arguments.
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Press the "Enter" key so that the result of calculating annuity payments is displayed in the cell. If you entered all the function arguments correctly, the calculation result will appear in the corresponding table cell.
- In the example under consideration this will be the amount RUB 506.69. This is exactly the amount of the monthly payment on this loan.
- If you see the error "#NUMBER!" in a cell. or other incorrect result, this means that you entered the function or its arguments incorrectly. Double-check the input line and try to correct any errors.
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Calculate your total loan payments by multiplying the monthly payment by the total number of payments. To find out the total amount of loan payments, you only need to multiply the monthly payment by the number of payments over the entire loan term.
- In this example, multiplying 506.69 by 360 gives 182408 rubles. This is the total amount of loan payments over the entire loan term.
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Calculate the total interest amount by reducing the total loan payments by the original loan amount. If you want to find out how much interest you will need to pay for using a loan, you need to perform a simple subtraction operation. Reduce your total loan payments by the original loan amount.
- In the example under consideration, it is necessary to subtract 100,000 rubles from 182,408 rubles. As a result you will get 82408 rub. This is the total amount of interest for the entire loan term.
Calculation table for automatic calculation of interest payments
The table below explains how to calculate interest payments based on any parameters in Excel, Google Sheets, or another spreadsheet program. Just fill it in with your own details. Please note that where indicated F x = (\displaystyle Fx=), input should be made through the formula entry line above the table to the right of the "Fx" button. Combinations of letters and numbers (A2, C1, and so on) correspond to the designation of specific cells in Excel and the Google Sheets application.
An example table for calculating annuity payments
A B C D 1 [Principal loan amount] [Total number of payments] [Annual Percentage Rate] [Monthly interest rate] 2 With a minus loan amount (-100000) Total number of payments in months (360) Annual Percentage Rate as a decimal (0.05) Monthly interest rate (divide annual rate by 12) 3 Monthly payment FX=PLT(D2;B2;A2;0). NOTE: The last argument of the formula is zero. 4 Total payment amount FX=PRODUCT(D3,B2) 5 Total interest on loan FX=SUM(D4;A2) - Understanding the principle of calculating loan payments allows you to weed out unsuitable lending options and choose exactly the conditions that really suit you.
- If you have a variable income, it is likely that the best choice may be a loan that is not necessarily the lowest rate, but with a longer loan term and less frequent and smaller payments, although you will have to pay more interest in total. .
- If you have a good regular income that leaves you with a lot of available funds, it would probably be wiser to take out a loan with a favorable rate, with a shorter term and higher monthly payments, as this will ensure a reduction in the total interest amount over the entire loan term.
Warnings
- Often, loans with a minimum interest rate are not the most profitable in terms of the total amount of payments. With knowledge of the principles of calculating loan payments, you will be able to quickly estimate the real cost of using borrowed funds, which you will ultimately have to pay.
Sources
- http://www.interest.com/home-equity/calculators/monthly-payment-calculator/
- http://www.investopedia.com/terms/i/interestrate.asp
- https://www.sravni.ru/avtokredity/calculator/?productType=15&isPeriodChanged=¤cy=1&IsInitialAmountInPercents=0&IsRetirees=false&CreditSubTypes=0&amount=1000000&initialAmount=300000&period=3-0-0&solvencyProof=127&bankG roupId=0&showAll=false&selectedBankId=false&orderBy=0&term=
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Enter your loan information into the loan calculator to quickly calculate your interest payments online. Calculating interest payments is not limited to simple calculations. But fortunately, a quick online search for “loan calculator” will allow you to easily calculate the regular amount of annuity payments on a loan, as long as you know the initial loan terms that should be entered into the calculator.
Find out your loan interest rate before taking out a loan. The interest rate determines the cost of using borrowed funds. It also forms the basis for calculating the total amount of interest that you will pay to the lender over the entire loan term. It is to your advantage to keep the interest rate as low as possible. Even a 0.5% difference can represent a huge amount in monetary terms. If you choose to make smaller loan payments, you may need to extend the loan term, accept a higher interest rate (due to increased risk for the lender), and pay more interest, but thereby reduce the financial burden on your monthly budget. This lending option is preferred by people with smaller savings and those whose salary is heavily dependent on bonuses and commissions. However, we recommend that you try to find a loan option in which the interest rate on the loan will not exceed 10%. Currently in Russia, interest rates on various types of loans, on average, fluctuate within the following limits:
Find out the frequency of interest accrual on the loan. Technically speaking, the frequency of compounding determines the amount of interest paid to the lender. The more frequently interest accrues, the more you'll end up paying, since you'll actually have less time to pay off the interest and keep it from accruing. For example, if you took out a loan in the amount of 100,000 rubles at a preferential rate of 4% per annum, then the total amount of loan payments may turn out to be different at different rates of interest accrual:
DOI: https://doi.org/10.15688/lc.jvolsu.2017.3.15
UDC 34.466.3 LBC 67.304.1
THE INTEREST RATE UNDER THE CREDIT AGREEMENT IN THE LIGHT OF JUDICIAL PRACTICE
Irina E. Mikheeva
O.E. Kutafin Moscow State Law University (MSLA), Moscow, Russian Federation
Igor A. Ostapenko
Volgograd State University, Volgograd, Russian Federation
Introduction: the condition of the interest rate on the credit is material to the credit agreement. The civil legislation does not stipulate the requirements to the maximum interest rate under the credit agreement, which leads to the disputes in practice. The aim of the study is the legal precedents of applying the Russian legislation on interest under the credit agreement and changing the interest rate both by agreement of the Parties and unilaterally. Methods: the methodological framework for this study is a set of scientific methods, among which the main place is occupied by the method of analysis and the comparative law method. Results: grounded in the work the author's point of view is based on the legislation and judicial practice. The author concludes that the condition on the interest rate may be invalidated by the court if the interest rate is significantly different from the market conditions because of the disadvantageousness of such a condition.
The legal nature of the raised interest depends on what ground the interest rate was raised, which can serve as a liability or a new fee for the credit under certain conditions.
Conclusions: the law provides for the right of a credit institution to unilaterally raise the interest rate in cases stipulated in the contract, however, the newly established interest rate should be consistent with the principles of good faith and reasonableness; in addition, the bank has to prove the grounds for which it considers the possibility of the unilateral change of the interest rate.
Key words: interest rate, change of interest rate, credit institutions, borrowers, disadvantageousness, market conditions.
UDC 34.466.3 BBK 67.304.1
SIZE OF INTEREST RATE UNDER A LOAN AGREEMENT IN THE LIGHT OF COURT PRACTICE
Irina Evgenievna Mikheeva
Moscow State Law University named after. O.E. Kutafina (MSAL),
^ Moscow, Russian Federation
Igor Anatolievich Ostapenko
C Volgograd State University, Volgograd, Russian Federation
n Introduction: the condition on the amount of interest for using the loan is essential for the loan agreement. Civil legislation does not establish requirements for the maximum interest rate under a loan agreement, which leads to controversial situations in practice. ® The purpose of the study is the judicial practice of applying the provisions of the current Russian legislation on interest under a loan agreement, changing the interest rate both by agreement of the parties and unilaterally. Methods: the methodological basis of this study 2 is a set of methods of scientific knowledge, among which the main place is occupied by methods of ® analysis and comparative legal. Results: the author’s position substantiated in the work is based on
legislation and judicial practice. The author concludes that the condition on the interest rate may be invalidated by the court if the interest rate differs significantly from market conditions, due to the enslavement of such a condition.
The legal nature of increased interest depends on the basis on which the interest rate was increased, which can act as a measure of responsibility or a new fee for using a loan under certain conditions.
Conclusions: the law provides for the right of a credit institution to unilaterally increase the interest rate in cases provided for in the agreement, however, the newly established interest rate must comply with the principles of good faith and reasonableness, in addition, the bank must prove the grounds with which it associates the possibility of unilaterally changing the interest rate.
Key words: interest rate, interest rate change, credit organizations, borrowers, bondage, market conditions.
Introduction
The amount of interest for using a loan in accordance with Art. 809, 819 of the Civil Code of the Russian Federation is determined by agreement of the parties to the loan agreement.
At the same time, as A.E. noted at the beginning of the last century. Worms, “the amount of contractual interest is not limited by law” (quoted from:). Until now, “modern Russian civil legislation does not provide for any restrictions on the maximum amount of interest and, accordingly, the consequences of establishing a high interest rate.”
Accordingly, the parties to the loan agreement can agree on any maximum interest rate for using the loan. At the same time, given that credit institutions are professional participants in these legal relations, in practice abuses on their part are possible.
Despite the absence of direct restrictions on the amount of interest in the legislation, in recent years the position has been developed in judicial practice that the amount of the interest rate under a loan agreement must be agreed upon taking into account the market value of the interest rate.
Requirements for the market interest rate
The interest rate should be set taking into account market conditions, as indicated by the Plenum of the Supreme Court of the Russian Federation in paragraph. 2 clause 14 of the Decree of November 22, 2016 N° 54 “On some issues of
changes to the general provisions of the Civil Code of the Russian Federation on obligations and their fulfillment” (hereinafter referred to as Resolution of the Supreme Court of the Russian Federation No. 54). If credit institutions fail to comply with this requirement, there is a risk that they will be refused to collect the excess portion of the interest in court.
An interest rate, the size of which differs significantly from the market rate, may indicate the establishment of extremely unfavorable terms of this agreement for the plaintiff (borrower) and the enslavement of the loan agreement. The enslaving transaction may be declared invalid.
In the Information Letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated December 10, 2013 No. 162 “Review of the practice of application by arbitration courts of Articles 178 and 179 of the Civil Code of the Russian Federation”, it was concluded that the provisions on enslavement of a transaction are applied to citizens engaged in business activities without forming a legal entity, despite the fact that the nature of their activities, like those of commercial organizations, is associated with entrepreneurial risk. As the court pointed out, “in accordance with Article 179 of the Civil Code of the Russian Federation, the elements established for declaring a transaction invalid as enslaving include concluding a transaction on extremely unfavorable conditions, which may be evidenced, in particular, by an excessive excess of the contract price relative to other contracts of this type. However, the presence of this circumstance is not necessary to invalidate a transaction made under the influence of deception, violence, threat or malicious agreement between a representative of one party and the other party.
In satisfying the claim, the court proceeded from the fact that the evidence presented by the plaintiff confirmed the fact of a confluence of difficult circumstances on the plaintiff’s side. At the same time, the court noted that, taken together, the amount of interest under the disputed loan agreement, which differs excessively from the interest rates under concluded agreements of the same type, and its term indicate that the conditions of this agreement have been established to be extremely unfavorable for the plaintiff (borrower). Moreover, the interest rate under the disputed agreement was so much higher than the average interest rate prevailing in the lending market for loan agreements with similar conditions (no more than 30-40 percent per annum), that the totality of the above circumstances sufficiently indicates the enslavement of the said agreement.<...>. The court emphasized that the plaintiff’s status as an individual entrepreneur does not mean that he is not subject to the statutory guarantees for the protection of the property interests of participants in civil transactions, including when making transactions on extremely unfavorable conditions.<...>».
The controversial loan agreement was declared invalid by the court on the basis of Art. 179 of the Civil Code of the Russian Federation.
The procedure for changing the interest rate
Changing the interest rate under a loan agreement is carried out according to the general rules established by the Civil Code of the Russian Federation on changing the agreement, taking into account the special provisions provided for by law for the loan agreement.
According to paragraph 1 of Art. 450 of the Civil Code of the Russian Federation, amendment of the contract is possible by agreement of the parties, unless otherwise provided by the Civil Code of the Russian Federation, other laws or the contract.
Changing the interest rate by agreement of the parties, as a rule, does not give rise to controversial situations in practice.
Changing the interest rate unilaterally
General requirements for the procedure for unilateral changes in obligations established
we clause 2 art. 310 of the Civil Code of the Russian Federation, which provides the grounds for such a change, depending on the nature of the activities of the parties to the agreement (entrepreneurial, personal).
Since changing the interest rate unilaterally is a unilateral change in the obligation, the rules of clause 2 of Art. 450.1 of the Civil Code of the Russian Federation, providing that in the event of a unilateral refusal of the contract (execution of the contract) in whole or in part, if such a refusal is allowed, the contract is considered terminated or amended.
As explained by the RF Supreme Court, in paragraph 13 of the RF Supreme Court Resolution No. 54, by virtue of paragraph 1 of Art. 450.1 of the Civil Code of the Russian Federation, the right to unilaterally change the terms of a contractual obligation or to unilaterally refuse to fulfill it can be exercised by the authorized party by appropriate notification to the other party. The contract is amended or terminated from the moment when this notice is delivered or is considered delivered according to the rules of Art. 165.1 of the Civil Code of the Russian Federation, unless otherwise provided by the Civil Code of the Russian Federation, other laws, other legal acts or terms of the transaction, or does not follow from custom or from practice established in the relationship of the parties.”
The most controversial situations in law enforcement are situations related to an increase in the interest rate, which will be discussed in more detail.
As already noted, an increase in the interest rate under a loan agreement is possible only with borrowers who are business entities, and is impossible with consumer citizens.
The solution to the question of the relationship between interest on a monetary obligation and interest as a measure of liability for failure to fulfill a monetary obligation is determined by the difference in the legal essence of both interest.
The legal nature of the increased interest rate under a loan agreement in the event of a borrower’s failure to fulfill an obligation is determined taking into account the nature of the violation committed by the borrower, which can be divided into two grounds: for
reduction of overdue debt on the loan (principal debt); for all other violations for which the loan agreement provides for an increase in the interest rate.
Let us analyze in more detail the specified reasons for increasing the interest rate under the loan agreement.
According to Art. 811 of the Civil Code of the Russian Federation, unless otherwise provided by law or the loan agreement, in cases where the borrower does not repay the loan amount on time, interest is payable on this amount in the amount provided for in paragraph 1 of Art. 395 of the Civil Code of the Russian Federation, from the day when it should have been returned until the day it is returned to the lender, regardless of the payment of interest provided for in paragraph 1 of Art. 809 of the Civil Code of the Russian Federation.
The issue of the legal nature of interest increased in connection with the occurrence of overdue debt on a loan has remained controversial in banking practice for a long time.
However, the courts have repeatedly noted that increasing the interest rate in the event of overdue debt is a type of civil liability for violation of obligations. Thus, in paragraph 15 of the Resolution of the Plenum of the Supreme Court of the Russian Federation No. 13, the Plenum of the Supreme Arbitration Court of the Russian Federation No. 14 of October 8, 1998 “On the practice of applying the provisions of the Civil Code of the Russian Federation on interest for the use of other people’s funds”, it is explained that “in those cases “When the loan agreement or credit agreement establishes an increase in the amount of interest due to late payment of the debt, the amount of the rate by which the fee for using the loan is increased should be considered a different amount of interest established by the agreement in accordance with paragraph 1 of Article 395 of the Code.”
Interest rate for illegal use of funds in accordance with Art. 395 of the Civil Code of the Russian Federation can be calculated based on the key rate of the Bank of Russia, which was in effect during the relevant periods in the absence of another agreement of the parties, or in the amount of the rate by which the interest rate is increased, provided for by agreement of the parties.
At the same time, the position has also been expressed in the literature that interest accrued upon the occurrence of overdue
debt on the principal debt, in the light of judicial clarifications, can be both a measure of liability (Article 395 of the Civil Code of the Russian Federation) and ordinary interest for the use of borrowed funds, only changed under the condition of non-repayment of the loan within the prescribed period. An increase in interest should be considered as a change in the interest rate for using the loan amount upon the occurrence of a certain condition - delay in repayment of the loan amount. In this regard, increased interest must be included in the principal amount of the debt.
However, this position seems unconvincing, since Art. 811 of the Civil Code of the Russian Federation provides for the accrual of interest in the event of overdue debt under Art. 395 of the Civil Code of the Russian Federation.
In cases where an increase in the interest rate in the loan agreement is provided for failure to fulfill obligations on the part of the borrower (except for the occurrence of overdue debt on the loan), the unilaterally changed interest rate is a fee for using the loan, unless otherwise provided by the loan agreement.
This position has been repeatedly expressed by the judiciary.
The Presidium of the Supreme Arbitration Court of the Russian Federation in paragraph 13 of the Information Letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated September 13, 2011 No. 147 “Review of judicial practice in resolving disputes related to the application of the provisions of the Civil Code of the Russian Federation on a loan agreement” established that “the court collected the debt under the loan agreement, containing a condition on increasing the amount of interest in the event of a deterioration in the loan security, as well as a decrease in the indicators of the financial and economic activity of the borrower specified in the agreement, increased interest in full, establishing that the security for the fulfillment of obligations under the agreement has been lost, and new security has not been provided.<...>the condition of increasing interest in this case cannot be considered as a condition of liability for violation of the obligation to repay the loan...”
Thus, the increased interest rate for violations other than those arising
the increase in overdue debt on the principal debt (loan), unless otherwise provided by agreement of the parties, will be the new amount of interest for using the loan.
When increasing the interest rate on loan agreements, the requirements of Art. 10 of the Civil Code of the Russian Federation, that is, the creditor must not violate the reasonable balance of the rights and obligations of the parties or otherwise violate the fundamental private law principles of reasonableness and good faith, which has been repeatedly noted in court decisions.
Let us illustrate this conclusion with a specific court case.
The Presidium of the Supreme Arbitration Court of the Russian Federation, considering case No. A71-10080/2010-G33, in Resolution No. 13567/11 of March 6, 2012, indicated the following: “<...>When exercising the right provided for in a loan agreement to unilaterally change the terms of lending, the bank must act within the permissible limits of exercising civil rights and prove the existence of grounds with which, under the terms of the agreement, the possibility of a unilateral change by the bank in the amount of payment (interest) for the loan is associated.
The bank’s right to unilaterally change the interest rate on a loan, enshrined in the agreement, does not mean that the borrower who does not agree with such changes cannot prove that a unilateral change in contractual terms violates the reasonable balance of rights and obligations of the parties, contradicts established business practices, or otherwise violates fundamental private law principles of reasonableness and good faith.”
A similar position was expressed by the Supreme Court of the Russian Federation, which in paragraph 14 of Resolution No. 54 of the Supreme Court of the Russian Federation indicated that “when a party exercises the right to unilaterally change the terms of an obligation or unilaterally refuse to fulfill it, it must act reasonably and in good faith, taking into account the rights and legitimate interests of the other party (clause 3 of article 307, clause 4 of article 450.1 of the Civil Code of the Russian Federation).
For example, on this basis, the court refuses to collect part of the interest on a loan agreement in the event of a unilateral
th, unconditional disproportionate increase in the bank’s interest rate.”
It should also be taken into account that the bank must prove the grounds on which the possibility of unilaterally changing the interest rate is associated.
The amount of interest under a loan agreement should not differ excessively from the interest rates under concluded agreements, that is, it must correspond to market conditions.
A condition on the interest rate that differs significantly from the market rate may indicate the enslavement of the loan agreement.
When increasing the interest rate under a loan agreement, the requirements of Art. 10 of the Civil Code of the Russian Federation, that is, the creditor must not violate the reasonable balance of the rights and obligations of the parties or otherwise violate the fundamental private law principles of reasonableness and good faith.
A bank's unilateral change of the interest rate under a loan agreement may be declared invalid by the court if it is proven that the bank's actions violate the general balance of interests of the parties and contradict the principles of reasonableness and good faith (Articles 1, 10 of the Civil Code of the Russian Federation), including about market interest rate conditions, or the borrower was placed in conditions that did not allow him to fulfill the obligation properly.
The consequences of an unreasonable unilateral increase in the interest rate in violation of the principles of good faith and reasonableness are refusal to collect part of the interest under the loan agreement; invalidation of controversial contractual terms, including according to the rules of Art. 428 Civil Code of the Russian Federation.
BIBLIOGRAPHY
1. Dubrovskaya, I. Legal nature of increased interest / I. Dubrovskaya // EZh-Lawyer. -2013. - No. 38. - P. 1.
2. Egorova, M. A. Interest on a monetary obligation: a brief commentary on Article 317.1
Civil Code of the Russian Federation / M. A. Egorova, K. M. Arslanov // Bulletin of Arbitration Practice. - 2017. - No. 1. - P. 15-21.
3. Essays on credit law / ed. A.E. Vor-msa. - M.: Financial publishing house of the NKF USSR, 1926. - 167 p.
4. Chkhutiashvili, L. V. Current issues of regulation of a loan agreement under Russian law / L. V. Chkhutiashvili // Banking Law. - 2012. - No. 1. - P. 65-68.
1. Dubrovskaya I. Pravovaya priroda povyshennykh protsentov. EZh-Yurist, 2013, no. 38, p. 1.
2. Egorova M.A., Arslanov K.M. Protsenty po denezhnomu obyazatelstvu: kratkiy kommentariy statyi 317.1 GK RF. Vestnik arbitrazhnoy praktiki, 2017, no. 1, pp. 15-21.
3. Vorms A.E., ed. Ocherki kreditnogo prava. Moscow, Finansovoe izd-vo NKF SSSR, 1926. 167 p.
4. Chkhutiashvili L.V. Aktualnye voprosy regulirovaniya kreditnogo dogovora po rossiyskomu pravu. Bankovskoe pravo, 2012, no. 1, pp. 65-68.
Information about the Authors
Irina E. Mikheeva, Candidate of Juridical Sciences, Associate Professor, Deputy Head of the Department of Banking Law, O.E. Kutafin Moscow State Law University (MSLA), Sadovaya-Kudrinskaya St., 9, 125993 Moscow, Russian Federation, [email protected].
Igor A. Ostapenko, Postgraduate Student, Department of Civil and International Private Law, Volgograd State University, the Base Department of the Southern Scientific Center of the Russian Academy of Sciences, Prosp. Universitetsky, 100, 400062 Volgograd, Russian Federation, [email protected].
Irina Evgenievna Mikheeva, Candidate of Legal Sciences, Associate Professor, Deputy Head of the Department of Banking Law, Moscow State Law University. O.E. Kutafina (MGYuA), st. Sadovaya-Kudrinskaya, 9, 125993 Moscow, Russian Federation, [email protected].
Igor Anatolievich Ostapenko, postgraduate student of the Department of Civil and International Private Law, Volgograd State University, base department of the Southern Scientific Center of the Russian Academy of Sciences, prosp. Universitetsky, 100, 400062 Volgograd, Russian Federation, [email protected].
The interest rate specified in the loan agreement is its essential condition. In most cases, the credit institution, after agreement with the borrower, establishes the procedure for determining the loan rate and its size, including depending on the changing conditions provided for in the agreement between the parties to the transaction. This point is stated in clause 1 of Article 819 of the Civil Code of the Russian Federation; Part 1 Art. 29, part 2 art. 30 of the Law of December 2, 1990 No. 395-1; clause 4, part 9, art. 5 of the Law of December 21, 2013 No. 353-FZ.
In this article we will understand what is the maximum amount of interest on a loan that a bank has the right to set? and microfinance organizations. We would like to draw your attention to the fact that our material examines the issues of the maximum interest rate specifically for consumer lending (targeted and non-targeted loans to individuals).
How is the interest rate on consumer loans regulated?
If we refer to Part 1 of Art. 9 of Law No. 353-FZ, then we learn that the interest rate under a consumer credit agreement can be either fixed or variable. Different types of interest rates on loans are selected depending on the loan products and lending conditions in certain banks.
A credit institution, in most cases, under a loan agreement concluded with a borrower who is an individual, does not have the right to independently change the amount of interest on the loan or reduce the term of the agreement.
If we talk about a consumer loan, then the bank unilaterally only has the right to reduce the interest rate on a consumer loan on the basis of Part 4 of Article 29 of Law No. 395-1 and Part 16 of Article 5 of Law No. 353-FZ.
A consumer loan agreement, which stipulates the mandatory conclusion of an insurance agreement, may contain a condition that the lender has the right to decide to increase the interest rate on the loan provided.
This can happen if the consumer does not fulfill his life insurance obligations (health, job loss, ...) for more than 30 calendar days.
Thus, if, when receiving a loan for several years, the client insured his life only for the first year, and then did not insure himself, then after a year the bank can raise the interest rate on the already issued consumer loan.
Please note that if the borrower refused insurance and the bank increased the interest rate on an existing loan, this rate can only be increased by the level that was fixed at the time of signing the loan agreement in accordance with Part 11 of Article 7 Law No. 353-FZ.
At the legislative level in Russia, a limitation on the total cost of credit (FLC) has been fixed, which has a direct impact on the interest rate in Russian banks.
By law, in a loan agreement, a bank cannot establish interest rates on a consumer loan that exceed the average market interest rates by more than one third. The calculation of the average market interest rates is carried out by the Central Bank of Russia quarterly.
The Central Bank has the right to lift the limitation on interest rates on loans to banks only if there is a fundamental change in market conditions in the country (according to Part 11 of Article 6 of Law No. 353-FZ).
On a note! Once a quarter, the Bank of Russia calculates the average market value of the PSC as a weighted average value for at least 100 leading banks in the country, both for certain types of credit products, or for no less than for credit products of one third of the total number of credit institutions of the Russian Federation (according to Part 10 of Art. 6 of Law No. 353-FZ).
The Bank of Russia publishes the average market value of the PSC once a quarter in the form of information and analytical materials on the official website of the Central Bank of the Russian Federation - “Information on the average market value of the full cost of a consumer loan (loan).”
What is the maximum interest rate on a microloan that an MFO can set?
Let's look at the features of interest rate restrictions on microloans issued not by a bank, but by a microfinance organization (MFO).
If a consumer loan agreement was concluded with a microfinance organization for a short period (up to 12 months) starting from 01/01/2017, then the interest rate on it is limited to three times the loan amount.
The exception is payments to microfinance organizations for additional services, as well as fines and penalties in case of delays (see Part 9, Part 1, Article 12 of Law No. 151-FZ dated July 2, 2010, and Part 7, Article 22 of Law No. 3, 2016). 230-FZ).
If we talk about consumer loan agreements that MFOs entered into in the second quarter of 2017, the average market value of the PSC for a consumer microloan without collateral (with the exception of POS microloans), in the amount of up to 30,000 rubles and for a period of 30 days inclusive, amounted to 599.367%. Thus, the maximum PSC was 799.156%.
Please note that if you took out a microloan from a microfinance organization under a short-term agreement after 01/01/2017, then in case of delay in repaying the microloan amount or paying interest on this loan, the microfinance organization has the right to charge you a penalty (fines, penalties), or other measures of liability for the outstanding portion of the principal debt under the loan agreement. In addition, the MFO may continue to accrue interest on the outstanding portion of the principal amount until the total interest amount reaches twice the amount of the outstanding portion of the loan in accordance with Art. 12.1 of Law No. 151-FZ.
In addition to the supply and demand for money and the actions of the central bank, there are a number of other factors that influence interest rates on specific instruments. These factors include:
- solvency of the borrower - the likelihood that the borrower will not be able to repay the principal amount of the loan and pay interest on it
- borrowing term – depending on economic prospects and supply and demand factors, the interest rate on a loan with one term may differ from the rate on a loan with another term
- the size of the principal amount of the loan - a large loan is more difficult to repay than a small one; however, the lender may be able to offer an attractive interest rate on a large loan as a result of economies of scale
Most loans require a certain security deposit to cover the risk of default by the borrower, that is, the credit risk of the loan. Governments, or more specifically central banks, are considered the most solvent borrowers in a country, as they are lenders of last resort.
Minor Factors
1. Demand for money and its supply
The higher the demand for money, the higher the interest rate. High interest rates discourage borrowers and thereby reduce economic activity in the country. Low interest rates, on the contrary, stimulate borrowers and contribute to the growth of economic activity.
2. Government actions
The government can influence the interest rate through the central bank. A reduction in the amount of money in circulation in a country leads to an increase in interest rates and, therefore, a decrease in economic activity. An increase in the amount of money in circulation lowers the interest rate and increases economic activity.
3. Inflation
Lenders expect to receive compensation for the loan issued. This compensation is the interest rate charged for the use of funds. The interest rate must be higher than the inflation rate, otherwise the interest on the loan will not compensate for the loss in the value of money.
4. Deflation
Deflation is the reverse of inflation
Consequences of changes in interest rates
The consequences of changes in interest rates are different and affect the financial and real sectors of the economy.
Changes in the interest rate affect demand in the money market: when the rate rises, demand decreases, and when it decreases, it increases.
Since the supply of money does not automatically lead to a change in the rate, the equilibrium in the market is disturbed: when the rate increases, there is an excess of money (threatening inflation), and when the rate decreases, there is a shortage of money (threatening deflation).
Under these circumstances, there is a need for government control over the movement of interest rates. The interest rate is an object of government regulation, and the interest rate policy of the Central Bank of the country is an important tool of monetary regulation. Therefore, the interest rate established by the Central Bank based on a study of the state of the money market is a barometer and guideline for determining interest rates for all types of operations in the money market.