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Published in Stream:
Russia Update: June 21, 2016
Press by
The Interpreter
@Interpreter_Mag
Russian-to-English translation journal, with original analysis and commentary on Russia's foreign & domestic policy.
Interpreter_Mag
Russian Parliament Passes Law Barring Violent and Deceptive Tactics of Debt Collectors
6 years
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The State Duma has passed a law in the third reading regulating the activity of debt collectors, Novaya Gazeta reported, citing RIA Novosti.

The law, approved by 343 Duma members bans the use by debt collectors of physical force, threats, damage of property, psychological pressure or "misleading" debtors. They are also barred from concealing their telephone numbers or emails in communications about debts. A debt collector may only contact a debt collector in person once a week, and cannot phone more than twice a week, and only from the hours of 9:00 to 20:00 on weekdays, and from 8:00 to 22:00 on weekends.

Persons who have a court sentence that has not yet been served or removed cannot contact debtors. 

Russian debt collectors have used the tactics familiar to Westerners of calling repeatedly at all hours, but in numerous cases have gone way beyond them, damaging their cars, injecting glue in their door locks, and posting their phone numbers on prostitutes' websites, the LA Times reported.

The law represents an effort to cope with some of the outrageous practices of debt collection agencies as Russians grow more desperate in the economic crisis. As the New York Times reported, the tactics used are reminiscent of the mob.

There have been cases  of sex abuse, the breaking of a woman's finger and even the burning of a toddler in the firebombing of a house. The violence seems particular prevalent in small debts as physical force makes it easier to collect debts, one former debt collector told the Times.

In the case of the firebombing, the Moscow Times reported that Ismail Guseinov, a grandfather, turned to a pay-day lender to obtain a high-interest loan of 4,000 rubles ($50) to pay for medicine for a bad back. But soon he fell behind on payments and debt collectors demanded ten times the original sum 40,000 rubles.

First, they threw a brick through his window with a message, "We'll burn your house down." Then they began calling Guseinov's children. Finally, a Molotov cocktail was thrown into the wooden house, burning Guseinov's grand son badly. The incident galvanized press to cover the issue and people to complain about the heavy-handed methods.

Last year, the amount of unpaid debt in Russia surged by almost 50 percent to $15 billion, and the total number of debtors as of April was 7.5 million, the New York Times reported.

The different angles the Russian media has taken in reporting this issue, and the statistics available from official agencies, may make it difficult to grasp the extent of the problem. 

Vedomosti reported that more than 4.5 million Russians owed debts to banks and companies over 10,000 rubles and were at risk for being barred from travel from Russia.

According to this report, the number of debtors increased by 28.6% since June 2015. 

At least 10.5 million loans had not had payments in 90 days. After a customer misses one payment, a bank or other institution can take the debtor to court, where under threat of the travel ban, they can force them to agree to a payment installment plan.

Vedomosti also reported that more than 1.2 million new court decisions were issued in the first four months of 2016 banning debtors from travel, up from 342,000 such decisions issued for the first 4 months of 2015.

But a representative of the Federal Bailiffs Service said that some people, upon having such a restriction imposed, immediately pay their debts, and as of June 10, the figure for the year so far was down to 702,200.

In fact, the law restricting debt collectors' practices has been passed just as at least one category of debtors have succeeded in reducing their unpaid loans, RBC reports.

As of June 1, 2015, according to the National Bureau of Credit Histories, the number of debtors owning less than 30,000 rubles was 13.7 million, 38 % of all debtors, or 35.6 million. Today, the figure of those with debts less than 30,000 is 10.7 million, or 30% of all debtors; thus the figure is 6% lower than last year..

But the number of Russians who owe debts of higher amounts has increased. The number of those who owe from 30,000 to 100,000 rubles has increased from 6.5 million to 7.4 million. And those who owe banks more than 1.4 million rubles has increased from 1.3 million to 1.4 million in a year.

The reduction in the number of debtors appears to be a factor of banks themselves restructuring their portfolios from smaller loans that are quickly repaid to long-term loans that take longer to pay. Banks have also tightened up their risk analysis for loans, giving out far fewer loans without collateral.

-- Catherine A. Fitzpatrick