Credit card companies are drafting an outline for deferring loan repayments


Having chosen not to join the outline of the banks to defer repayments Loans Due to the second closure that is happening due to the ongoing corona crisis, three companies Credit cards IsracardICC and Max agree with the Supervisor of BanksBank of Israel On a designated outline for them to defer repayments on consumer loans in the amount of up to NIS 100,000. In this context, the supervision and each of the companies discuss, separately, an outline in which a voluntary policy that each company adopts towards its customers who apply to it will be uniform for all three. For the time being, the parties have not yet reached an agreement on such a uniform outline, as far as is known, these are advanced stages of contacts in preparation for agreement on a uniform outline that may even be reached in the coming hours.

Negotiations for the outline for deferring repayments agreed to include the credit card companies was published a day after a uniform outline was published for banks, which as far as is known the credit card companies chose not to take part in – even though this was offered to them by the Bank of Israel. The credit card companies and the Bank of Israel identify different characteristics of the credit card companies in relation to the banks and therefore are now in contact with a designated agreed outline, as stated.

What will the uniform outline for loan deferral in credit card companies look like?

Thus, according to the emerging agreement – and not yet final – while in the banks it is a postponement of 6 months, that in consumer loans for non-housing can even be extended by 3 months for a total of 9 months, in the case of credit card companies it is probably a shorter postponement period, of 3 Months when companies will be given the right to decide individually whether they extend for another 3 months.

Apparently the draft agreement also includes agreements according to which the deferral is without commission and interest specified in the original loan, with the period for submitting an application for deferral being until the end of the year when only customers who paid the loan as required (without breach) will be entitled to deferral. The spread of the loans after the end of the deferral period will be according to the “technical capabilities” of the companies.

At the end of the second quarter of this year, the credit portfolio of the three credit card companies was NIS 17.3 billion, with 86% of the amount being credited to private customers, and the balance to businesses. Excluding credit for the purchase of vehicles (a dwindling portfolio), the consumer credit portfolio “for any purpose” of credit card companies stands at NIS 13.6 billion.

For credit card companies, this is a significant growth engine for the three companies, which invest a lot of resources in it, but to a minimal extent in relation to the banks’ credit volumes. However, due to the corona crisis, the volume of credit card companies’ credit portfolio shrank by about 4% in the second quarter, which implies that all three companies set foot on the brake pedal in the new credit-providing activity.

The existing link between the banks and the credit card companies happened earlier this year also in relation to the state-guaranteed aid funds that were initially open only to banks. Credit card companies expressed resentment and also demanded quotas in state-guaranteed funds. it happened. However, not all credit card companies have used it.

In any case, the credit card companies Isracard and Max became independent companies competing in the banking system last year, while ICC remained owned by the banks Discount (its controlling shareholder) and International. These three companies are supervised like the banks by the Bank of Israel Supervisor of Banks, while the rest of the non-bank credit institutions are supervised by the Capital Market Authority.

Already in the first wave, credit card companies were offered to join the outline with the banks. Even then, credit card companies said that there was a need to defer repayments to customers, but companies had a caveat that there was no need for sweeping rejection for all customers and that there were customers with such high risk levels that there was no room for deferral. Their debt. However, both in terms of credit card companies and banks this is a solution that can help a large portion of the audience. In recent days the issue has returned to the top of the agenda, with the entry into the second closure. Thus, in the shadow of the outline agreed with the banks, a request was made from the Bank of Israel to the credit card companies to have a uniform outline with the credit card companies as well.

In any case, the third outline for deferring loan repayments that the Bank of Israel has agreed with the banks, and which was published yesterday, is intended to give a window of time to borrowers who have encountered considerable cash flow difficulties following the corona crisis. The first outline was agreed as early as May, after several individual benefits taken by banks on their own initiative. In mid-July, another outline was published, which meant extending the agreed deferral period, in which the public may request a deferral of loan repayments without it being considered insolvency. As stated, yesterday another uniform and agreed outline was published for all banks, third in number.

A significant part of the public asked to defer repayments, with almost 740,000 loans, with repayment payments totaling NIS 9.5 billion so far being postponed. However, over time, the number of customers postponing repayments decreases, while there is still a significant public that needs to postpone repayments – which indicates a huge impairment in the repayment capacity of many Israelis, and which may herald a jump in insolvency in the economy.

In any case, the postponement of refunds has considerable economic significance. Although there are no fees for deferring repayments, the repayments to banks are not small or negligible but are only deferred and will be paid in full, including accruing additional interest on the interest not paid to the bank on time. Therefore, deferral should not be seen as a gift but as an alternative that has a price, such as taking a new loan from the bank, and therefore its cost should be weighed against its benefit before making such a deferral.

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