The Legal nature of the Credit Agreement Commissions

Abstract

This article deals with the legal nature of commissions charged under credit agreements with regard to the approaches of judicial organs. The author reviews the jurisprudence and concludes that commission means different by nature payments made by the borrower under the loan agreement. Controversial approaches of courts are caused by the fact that Russian legislation does not provide for any legal concept of "Commission under loan agreements." The lender and the borrower may agree on any condition regarding commission in the loan agreement under Art. 421 of the RF Civil Code and Art. 29 of the Federal Law "On banks and banking activities, "in connection with which banks charge commissions for providing a separate service, for example, the commission for opening a loan account or granting a loan. Based on the relevant jurisprudence, commission charged by banks from borrowers under loan agreements can be divided into the commissions covering loan interests and commissions charged as payment for additional services (property benefit, useful effect); Individual commissions, such as the commission for reserving and booking funds, for changing loan terms, for early repayment of the loan are treated by some courts as payments for providing the borrower with useful effect or property benefit, and by other courts as expenses. Commissions that are paid periodically and accrued to the balance of indebtedness according to their legal nature amount to the payments covering interests charged for using a loan. In such a situation borrowers have the illusion that credit is provided under a lower interest rate, though a part of the interest payment is hidden in the commission. It is difficult to get the commissions back from the Bank. The paper concludes that the parties to the loan agreement must negotiate the commissions or the procedure of their estimation; otherwise, the recovery of such a commission may become impossible for the Bank, which is confirmed by the jurisprudence.