The Bank of Russia issued an order that makes all commercial banks fully reveal the information on the real cost of the consumer loans they offer starting July 1, 2007. At the same time, the Supreme Court supported Rospotrebnadzor, the state consumer rights watchdog, in their claim that the extra commission for servicing a consumer loan must be made illegal.

According to Federal Antimonopoly Service, Russia’s consumer lending leaders increased their profits by one and a half to two times by hiding the actual interest rates. The annual interest rate of Russian Standard Bank, for instance, comes to 66% and not to the declared 29%. Home Credit and Finance Bank Ltd. charges the borrowers 52% rather than the declared 28.5%, Bank of Moscow has the annual interest rate of 31% instead of the declared 21%.

The same holds true for credit cards. Due to a number of ‘additional terms’ given in the contracts in small print, an average credit card holder often ends up paying not the 23% to 28% he or she has been promised as a charge for the service, but at least 45% to 75%.

The situation is now threatening for the banks themselves: they keep getting more and more delayed payments. Some estimates give such figures as 36bn RUR in 2006. The main danger lies in the increasing amount of bad debts and ‘dubious’ loans. Some experts believe their number went up 2.2 to 2.5 times last years, reports Trud newspaper.

People living in the Urals have been placing more complaints regarding poor banking services lately. In most cases, the complaints have to do with two banks only, namely, Russian Standard Bank and Home Credit and Finance Bank Ltd. This can be proved by the regular reports from the local division of Federal Consumer Rights Protection Service and Yekaterinburg Consumer Rights Committee.

Some analysts are inclined to think that it was because of the bank’s unethical actions that Rus-Rating, the rating agency, downgraded the bank in December 2006, which was the second downgrading within the last six months.

‘The bank can feel the negative impact of the new regulations related to economic estimates and other things introduced by the Central Bank of Russia in 2007,’ says Yulia Arkhipova of Rus-Rating.