On 5 May 2011 the Supreme Arbitration Court (the “SAC”) published on its website a draft review on the court practice of imposing administrative liability on a bank for infringing a consumer’s rights when entering into a credit agreement (the “Draft”).

The SAC has analysed the current court practice and concludes that:

  • a bank may legally include a provision in a credit agreement entitling the bank to accelerate the loan if the borrower breaches the terms and conditions of the loan;
  • a term providing for default interest (at an increased rate) does not infringe consumer rights if the borrower defaults, as the borrower is liable for the breach; and
  • a bank is infringing consumer rights when it accelerates a loan because a borrower’s financial status has deteriorated in the interim.  

There are two positions in terms of whether consumer rights are infringed by a dispute resolution clause which stipulates that disputes will be resolved in the local court of the bank: (i) the provision does infringe consumer rights and may not be included in consumer credit agreement; and (ii) the provision does not infringe consumer rights.

If the Draft is approved in the current version, banks will be required to review their standard form consumer credit agreements.

[Draft “Review of judicial practice on certain issues imposing administrative liability on a bank for infringing consumer rights when entering into consumer credit agreements” is published in Russian at the official website of the SAC at: www.arbitr.ru/vas/proj/]