Insurance proposed to be excluded from the body of loans in Russia

The Russian credit system may become more transparent. Consumer rights advocates have applied to the Central Bank with an initiative to ban financial institutions from imposing insurance and including it in the body of the loan. This often leads to the fact that customers are forced to overpay hundreds of thousands of rubles.

To make repairs in the apartment, Valeria Vlaeva decided to take a consumer loan – 250 thousand at nine percent per annum for four years. Having calculated the payment, I went to the office. But in reality, everything turned out differently.

“There, a bank employee told me that I can really count on such an interest rate, but at the same time I need to pay life insurance on top. If I don’t want to pay for this insurance, then the interest rate will be almost twice as high”Valeria complained.

The price of insurance is five thousand rubles. Without thinking twice, Valeria agreed and signed the contract, which she later regretted.

“It turns out from above for insurance I pay 50 thousand rubles”the woman added.

If you take a loan of one million rubles, then an insurance policy from a bank will cost an average of 15%. Automatically, this money is added to the loan, and you will have to pay interest not from a million, but from the total amount with an insurance policy. Credit is inflated.

To prevent such cases, consumer advocates called on the Central Bank to prohibit credit organizations and banks from including insurance in the body of the loan.

“Every year, more than a thousand complaints are received from clients who have taken a loan and realized that they were sold a “filkin’s letter” and are trying to return this money. But the amount of fraud is much larger, because the fees of insurance companies from borrowers who agree to sign any documents are hundreds of billions of rubles a year– explained Dmitry Yanin, Chairman of the Board of the International Confederation of Consumer Societies.

Bank employees are now going to all sorts of tricks with insurance. For example, they do not inform the client that the policy included in the loan affects the rate reduction. And often managers ask to conclude another insurance contract for a decent amount, which, as they promise, will give a lower interest on the loan. And in order for a gullible client to sign the documents, they give the most powerful argument, convincing that it is more profitable with insurance, and in case of early repayment of the loan, the bank returns the money for the unused period.

“The trick is that this rule applies only to those contracts that formally affect the loan rate. And sometimes the consumer is surprised to find out that he is supposed to return only the insurance premium, which was five thousand rubles, and under another contract, where the amount amounted to 200 thousand rubles, it turns out that he has no such right”– said financial commissioner Denis Novak.

At the same time, it is now profitable for insurance companies to work with banks, and not with their clients.

“Banks can and act as agents of insurance companies, they conclude a separate agreement due to the large branch network, points that banks have, personnel, insurance companies, roughly speaking, outsource the sale of these insurance products. Naturally, not a single company will conclude contracts at a loss”– said Alexei Voylukov, Vice President of the Association of Banks of Russia.

The bank receives 70% of the commission from the conclusion of such transactions, the insurance companies receive the remaining 30%. Everyone profits except the consumer. Now it is possible to refuse the imposed policy, but not all clients in banks are told about this.

“Within 14 days, after thinking, you can refuse this financial service, and you must return the funds. And when we accept these conditions, we agree that if we do not take out insurance, we pay the rate that is assigned by bank,” explained lawyer Evgenia Galkina.

Such opaque schemes are one of the problems that need to be regulated, experts say. Most importantly, if the consumer decides to take out a policy, he should have the right to choose the way to purchase insurance at his own expense or credit without changing the interest rate.