Central Bank of Russia will refine TCC mechanism to prevent banks from circumventing this restriction

MOSCOW. Aug 25 (Interfax) - The Central Bank of Russia plans to refine the mechanism of the total cost of credit (TCC) to discourage banks from circumventing TCC restrictions, according to an updated report on prospective directions for the development of banking regulation and supervision.

In particular, the Central Bank will develop a mechanism in H2 2025 to prevent the practice of banks circumventing TCC restrictions on credit cards by introducing fees for cash withdrawals/transfers using such cards.

The Central Bank also plans in H2 to work on improving the TCC restriction for credit cards so that all rates set by the lender are taken into account, not just the rates for non-cash card use and cash withdrawals. In 2024, banks began offering credit cards that provide for another, higher rate for money transfers. Consequently, it is advisable to regulate the application of the TCC restriction to the highest TCC value in this case, calculated based on the transfer rate.

In view of the changes in TCC regulation that occurred in 2024, the Central Bank also wants to analyze whether there is regulatory arbitrage in the segment of consumer loans provided by banks and microfinance institutions (MFIs). The CBR plans to develop solutions to level the lending conditions for products similar for banks and MFIs, as well as to study the business models of "bank-affiliated" MFIs to reduce the risks of banks circumventing TCC restrictions by attracting borrowers to subsidiary MFIs and issuing them expensive loans.

In addition, in 2026, the regulator wants to work on calculating and disclosing two TCC values for preferential mortgage loans - based on the preferential rate and the maximum rate, which, for example, applies if the borrower no longer meets the criteria of the state program. Currently, the calculation and disclosure of the TCC for such products are carried out only based on the maximum rate. Changing the approach will allow the borrower to approach obtaining a preferential loan more consciously, since besides the preferential interest rate, such a contract has other expenses that the borrower will most likely not pay attention to if they are not shown in the TCC format, the Central Bank said.