Consumer rights head slams debt collection laws

The head of Rospotrebnadzor,The Federal Consumer Rights Service,Gennady Onishenko, says debt collection agencies don’t have the right to take legal action against people unable to pay back their debt, and have no legal basis for much of their actions

Vedomosti reports on Tuesday, Onishenko as describing debt collection agencies as “completely outside legislation,” and adding that laws are required to bring about regulation in the sector.He added that some activities undertaken by the debt collection agencies are particularly pernicious.

“The ways to frighten people, a telephone terrorism and a disclosure of a banking secret to third parties.”

Alexandre Morozov, head of the National Association of professional collector agencies agrees that there is no separate law for collector agencies, but notes that banks are regulated by Civil Code rights to claim from one creditor to another. Andrey Osipov from VTB 24 also referred to the Civil Code, adding that there is no need to get permission from a debtor to hand over the information about his debts.Oleg Prusakov, head of the department for protection of consumer rights at Rospotrebnadzor,argues that this cannot be applied to collector agencies in Russia, since they are not credit institutions.

The debt collection business has grown significantly during the global financial crisis and subsequent economic downturn, with even big state banks, such as VTB 24 and Sberbank, handing over about $6 billion of retail loans to agencies.

Igor Kostikov, head of the board at Finpotrebsoyuz, adds that people in almost all other countries feel much better legally protected, with the risk to go bankrupt well secured by the Government.

“In the rest of the world there’s a law about an individual bankruptcy that helps people who find themselves unable to pay back their debts. If during a legal case, it is found out that a bank knew that a person is highly unlikely to pay back the money and despite this lent the money to that person, then the person can get his debt restructured, with a revised interest rate or will be allowed to not pay back the loan at all. The draft of such a law is being currently worked out in the Ministry for Economic Development, but I doubt it would come into effect before the elections.”