Low interest rates on credit cards during promotional periods cannot be used as a basis for calculating the total cost of credit (TCC), according to a recent directive from the regulator. The relevant information letter has been sent to credit institutions.
Some banks offer promotional periods with minimal interest rates for credit cards. Once this period ends, interest rates for customers increase significantly. The Bank of Russia has identified that some banks calculate the TCC based on the interest rates in force during the promo period.
The document stipulates that such a method to calculate the TCC contradicts the law ‘On Consumer Loans (Microloans)’ and misleads borrowers. It instructs creditors to calculate the TCC based on the maximum amounts of borrowers’ payments in force outside of the promo period.
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