A loan holiday law was adopted in view of the coronavirus pandemic
A law providing for a grace period with a deferment of repayment of loan principal and interest was adopted in Russia on April 02, 2020.
Borrowers who contracted a loan before the entry into force of this law may, at any time but no later than September 30, 2020, request lenders to change the loan contract terms to suspend the performance of obligations for a period specified by borrowers (grace period).
Instead of deferring payments, individual entrepreneurs who have borrowed money may request a reduction in repayment for the duration of the agreed grace period.
Creditors may not, throughout the grace period, charge forfeits, fines or penalties, request early fulfillment of contractual obligations, claim foreclosure or apply for such claims to guarantors.
When confirming the grace period under revised mortgage agreements, creditors must change the mortgage registration record, and if necessary, the mortgage.
Conditions for setting up a grace period for a loan
Borrowers may request a grace period if the following conditions are met simultaneously:
- The loan amount cannot exceed a certain threshold if it is set by the Russian government for such loans;
- The borrower’s income has decreased by more than 30% compared with the average monthly income (or total income of several borrowers) in 2019;
- No grace period is already in place under Article 6.1-1 of the consumer credit law when borrowers submit their request for grace period.
Restriction on grace period duration
Borrowers may determine the duration of the grace period and its start date subject to certain conditions. It should be noted that the grace period cannot exceed 6 months.
Documents confirming income decrease
Creditors are entitled to request documents confirming a decrease in income. Borrowers should submit these documents within 90 days of the submission of an application for deferment of loan payments.
The following documents may be used to confirm income decrease:
- Statement of income received and tax withheld for 2020 and 2019;
- Extract from the register of unemployment benefit recipient;
- Sick leave note issued for at least 1 month;
- Other documents.
If you have any questions about the aforementioned law, please do not hesitate to contact us.