A loan can be a lifesaver when you urgently need money. However, it can also become a source of problems if you miss payments. What should you do if you cannot repay the debt on time? What consequences might arise from late loan payments, and how could this affect future lending and your credit history?
We explain in detail the process of loan restructuring in the event of overdue payments on bank loans or microloans.
How can loan restructuring assist borrowers from banks and microfinance organizations (MFOs)?
To address overdue debts, a unified and mandatory out-of-court procedure for resolving overdue debts of individuals by banks and MFOs was legislatively introduced in October 2021.
Since 2021, this unified procedure has allowed 1.7 million borrowers to modify their loan terms, and in 2024, creditors restructured loans for more than 420,000 borrowers (189,000 bank borrowers and 231,000 MFO borrowers).
According to this procedure, banks and MFOs are required to notify borrowers about the occurrence of overdue payments within 10 calendar days from the date of occurrence. This notification period was established starting June 2024. Under the new legislation, the notification period for creditors to inform borrowers about overdue payments has been reduced from 20 to 10 days.
What should be included in the notification from the bank or MFO?
In the notification, creditors must inform individuals about the necessity of making payments, specifying the exact amount of the overdue debt, their right to contact the bank or MFO, and the consequences of failing to meet their loan obligations.
Remember! If you change your place of residence or mobile phone number, you must inform your credit manager. It is very important to keep the bank or MFO updated about your contact information.
Borrower's Rights
A borrower has the right to contact the creditor for loan restructuring with a written request within 30 calendar days from the date of the overdue payment, either in writing or through digital means as specified in the loan agreement.
To enhance the effectiveness of the out-of-court procedure for resolving problematic debts in 2024, the agency established new requirements for banks and MFOs.
Previously, under the law from October 1, 2021, a borrower could contact the bank or MFO with a request to resolve overdue debt within 30 days. However, starting January 2025, the regulatory act allows a borrower to apply for changes to the loan agreement even after 30 calendar days from the date of the overdue payment.
This means that a borrower is not strictly tied to the overdue date and can approach the creditor for debt resolution at any convenient time. New rules also allow borrowers to submit requests for changes to the bank loan agreement via the bank's mobile app.
Remember! It is essential to document your communication with the creditor.
What should the borrower include in the application?
The application should state the reason for the overdue payment , such as a decrease in income or job loss; serious illness or disability; maternity leave; or force majeure circumstances (fire, theft, etc.). When stating the reasons, be sure to provide documentation.
Additionally, you may suggest possible restructuring options in your application. These actions can help reduce the chances of penalties, worsen your credit history, and avoid judicial enforcement.
Types of loan restructuring:
- reduction of the interest rate;
- payment deferral;
- change in repayment method (this condition is more typical for secured loans);
- extension of the loan term;
- forgiveness of overdue principal debt and/or interest, cancellation of penalties, fees, and other payments related to loan servicing;
- independent sale of real estate that is the subject of a mortgage, or providing a settlement by transferring collateral to the creditor;
- sale of real estate, with the obligation transferred to the buyer.
A borrower has the right to independently sell the property out of court within three months. If there is a court decision, the borrower may also independently sell the property within three months.
The creditor must respond to the borrower's application within 15 calendar days. Agreements on restructuring terms must be reached within 30 days from the date the borrower receives the creditor's proposals for changing the loan terms; otherwise, it will be considered a refusal to resolve the issue.
What new requirements have been established for banks and MFOs?
Banks and MFOs cannot demand that the borrower make an immediate payment of the overdue debt or its part in order to consider the restructuring request.
In practice, to provide a new repayment schedule, most banks and MFOs previously required the borrower to make an initial payment of 20-30% of the debt amount before addressing the restructuring issue. This practice has now been abolished.
Remember! The notification to the borrower regarding the overdue payment must specify the total amount of overdue debt on the principal, as well as the accrued interest. Additionally, the notification must include the amount of penalties (fines) accrued for breaching obligations related to the repayment of the principal and/or payment of interest.
When and at what times can the creditor communicate with the borrower?
The agency has adopted rules regulating the procedure for notifying the borrower about overdue payments. Now, a bank employee can notify a client with overdue payments from 8:00 AM to 9:00 PM on weekdays at the borrower's residence, place of registration, or in the bank (branch) office, no more than three times a week and no more than once on a weekday.
No more than three times from 8:00 AM to 9:00 PM on weekdays and no more than twice from 9:00 AM to 7:00 PM on weekends and holidays via telephone calls initiated by the bank.
Interaction between the bank and third parties is permitted to establish the location and/or contact details of the borrower for resolving and/or repaying overdue debts.
Similar rules apply to collection agencies.
MFOs can interact with borrowers by phone: negotiations are limited to once from 9:00 AM to 9:00 PM on weekdays. This rule will come into effect on February 27, 2025.
What should a borrower do if they cannot find a solution with the creditor?
If the creditor and borrower cannot reach a mutually acceptable solution, the borrower may contact the banking or microfinance ombudsman.
The banking ombudsman is Darkhan Kadyrbaevich Nurpeisov. As of December 21, 2024, the powers of the banking ombudsman have been expanded. His main task is to resolve financial disputes between borrowers and creditors out of court. He addresses disputes involving Kazakhstani citizens concerning all types of loans, including consumer loans. Previously, the ombudsman only participated in resolving disputes related to mortgage agreements between individual borrowers and banks.
The ombudsman does not consider applications that are already being reviewed by the court and/or for which there is a legally binding court decision, nor those submitted again in the absence of new circumstances.
The banking ombudsman has a call center, a WhatsApp phone number, an email address, and a website. The ombudsman's office is located in Almaty.
The microfinance ombudsman is Nazgul Karasovna Yesteusizova. Prior to this, she was the chairwoman of the National Chamber of Collectors of Kazakhstan. The new ombudsman has been tasked with ensuring the protection of MFO clients' rights and facilitating the resolution of disputes between borrowers and microfinance organizations, as well as collection agencies to whom rights (