The myth of “zero microloans” during the war: which charges are legal, and is it possible not to pay interest and fines

After the start of the full-scale war, a belief spread among borrowers that during martial law it is possible not to pay loans, and banks and microfinance organizations are allegedly obliged to write off not only fines but also interest. Such claims are especially common on social networks and in advertisements of certain legal companies promising to "completely get rid of the loan." In reality, Ukrainian legislation provides a completely different mechanism for protecting borrowers.

Martial law does not terminate credit agreements or cancel the principal debt. At the same time, the state has introduced a number of restrictions for lenders that prohibit charging certain types of financial penalties and oblige them to write off already accrued late payment fines. Therefore, the main question today is not whether the loan must be repaid, but which payments microfinance organizations can legally demand and which must be unconditionally written off. We analyze this in detail in the article.

Are interest charges on loans written off during martial law?

No. Neither the Civil Code of Ukraine nor the Law of Ukraine "On Consumer Lending" contains a provision that would automatically exempt the borrower from paying the principal or interest solely due to the introduction of martial law. Interest for using borrowed funds remains a payment for using the creditor's money, so it continues to accrue according to the terms of the agreement unless otherwise provided by law or agreement between the parties. In other words, the war itself does not terminate credit obligations.

However, the legislator limited the borrower's liability for delayed fulfillment of such obligations. Thus, paragraph 18 of the Final and Transitional Provisions of the Civil Code of Ukraine provides that during martial law and for 30 days after its termination or cancellation, the borrower is exempt from liability defined by Article 625 of the Civil Code of Ukraine, and the lender is obliged to write off penalties (fines, penalties) and other payments accrued due to delayed contract performance starting from February 24, 2022.

This provision has become the basis for many mistaken claims about the alleged full write-off of loans. In fact, the law speaks only about exemption from liability, not from the debt itself. That is, the borrower must repay the loan principal and legally accrued interest but does not have to pay penalty sanctions accrued for delays during the period of special martial law rules.

Which charges by microfinance organizations during martial law are legal and which are not

A common mistake is the belief that a microfinance organization has no right to increase the debt amount after a delay occurs. In reality, the law distinguishes interest for using the loan and liability for breach of contract terms.

The former is a payment for using borrowed funds, the latter are sanctions for late repayment. Therefore, the legal regime for them is different. Relations between the borrower and the microfinance organization are regulated, among others, by the Law of Ukraine "On Consumer Lending", which sets maximum financial burdens for consumers. In particular, according to Article 21 of this law, the amount of penalties for breach of obligations is limited.

Specifically: the penalty for late payment cannot exceed double the National Bank of Ukraine's discount rate;

Accordingly:

• the penalty cannot be more than 15% of the overdue payment amount;
• the total amount of fines and penalties during the contract term cannot exceed 50% of the loan amount received by the borrower.

Separate rules apply to microloans. After amendments to the Law of Ukraine "On Consumer Lending," lenders can no longer set unlimited interest rates, which previously often reached 3–5% per day. Law of Ukraine No. 3498-IX dated November 22, 2023, introduced the concept of a daily interest rate to Article 8 of the Law "On Consumer Lending" and set its maximum at no more than 1% per day. Thus, entering into new agreements with a higher daily rate contradicts legal requirements.

At the same time, even legal interest cannot be transformed into hidden penalties by repeatedly increasing the debt. That is why the Verkhovna Rada in recent years has repeatedly strengthened consumer protection in financial services by establishing clear limits for microfinance organizations.

Which payments must the creditor write off during martial law

The most important guarantee for borrowers is enshrined precisely in the transitional provisions of the Civil Code of Ukraine. According to paragraph 18 of the Final and Transitional Provisions of the Civil Code of Ukraine, during martial or emergency law and for 30 days after its termination, the borrower is exempt from liability under Article 625 of the Civil Code of Ukraine for delayed fulfillment of monetary obligations. Moreover, the law explicitly obliges the lender to write off fines, penalties, and other payments accrued due to delayed performance of the credit agreement starting from February 24, 2022. This means that if the borrower sees fines, penalties, or other sanctions for late payment listed separately in the debt statement and accrued after the start of the full-scale war, they have the right to demand their exclusion from the total debt amount. At the same time, this provision does not apply to the loan principal and lawful interest for using the loan funds.

Because of this, many debtors mistakenly believe that the creditor violates the law when continuing to demand repayment of the principal and accrued interest. In fact, the law prohibits only financial penalties for delays, not the fulfillment of the credit agreement itself. Therefore, before agreeing to the amount demanded by the microfinance organization, it is advisable to carefully check the debt structure.

How to check if the microfinance organization charged excessive interest or fines

If the debt amount has increased several times over a few months, it does not necessarily mean that all charges are legal. Before agreeing with the creditor's demands or starting negotiations on debt repayment, it is worth checking what exactly the debt consists of.

The borrower has the right to receive information about all components of the debt: separately the loan principal, interest, commissions, penalties, fines, and other payments. After that, several key points should be checked.

First, whether the interest rate complies with the requirements of the Law of Ukraine "On Consumer Lending." If the loan was issued as a microloan, the daily rate should not exceed the legal limits.

Second, attention should be paid to whether the company continued to charge fines or penalties for late payments after February 24, 2022. If such payments are present in the calculation, they may be subject to mandatory write-off according to paragraph 18 of the Final and Transitional Provisions of the Civil Code of Ukraine.

Third, it is worth checking whether the total amount of penalty sanctions exceeds the maximum limits defined by Article 21 of the Law of Ukraine "On Consumer Lending." It is also important to find out whether the creditor applies so-called "interest on fines" or "penalties on penalties." Such schemes have sometimes been used by certain lenders to artificially increase debt but contradict general principles of civil law and may be recognized as illegal.

If at least one of these points raises doubts, an official recalculation should be demanded first.

What to do if the microfinance organization refuses to write off fines

If the creditor continues to demand payment of fines or penalties accrued during martial law, the borrower has the right to challenge such actions. The first step should be a written appeal to the financial company itself. The statement should preferably specify: the credit agreement number, the debt amount demanded by the microfinance organization, which charges the borrower considers illegal, references to paragraph 18 of the Final and Transitional Provisions of the Civil Code of Ukraine and Article 21 of the Law of Ukraine "On Consumer Lending," a request to recalculate and provide a new debt calculation.

It is better to send such a statement by registered mail or through the company's official communication channels to have confirmation of receipt. If there is no response or the creditor refuses to change the calculation, the next step may be to appeal to the National Bank of Ukraine, which regulates the activities of banks and non-bank financial institutions. The complaint should include: a copy of the credit agreement, a statement with the debt calculation, a copy of the appeal to the microfinance organization, and the creditor's response (if received). The National Bank has the right to conduct inspections of financial companies and apply measures in case of violations of consumer financial services protection laws.

If even after this the dispute is not resolved, the final decision may be made by the court.

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