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11 Jul, 2009 05:07

Banks accused of loan shark tactics

Russian banks are being accused of intimidation in their desperate quest to get loans repaid.

Financial institutions were once free-and-easy with doling out loans when the going was good, but it has since come back to haunt them as bad loans have racked up as a result of the crisis, sending many to the brink of collapse.

With most of the population lacking a credit history, and with banks rarely sharing data with each other, Russian financial institutions have amassed more bad debt than their Western counterparts.

Customers complain they have no legal protection against cowboy practices. Banks counter that the bailiff service is inefficient, and that the court system is too slow and bureaucratic to be worthwhile for recovering debt.

One person bearing the brunt of fiscal harassment is Katya. She says she hasn’t seen her father in ten years, but that hasn’t stopped his bank from phoning her up repeatedly and demanding she pay back his loan. Allegedly he left her number for contact purposes before taking a large sum of money out and disappearing.

She compares the bank’s approach to that of street gangsters: “Every conversation with them is a slap in the face. I have been psychologically hurt by what is happening,” Katya said.

She has now hired a lawyer to defend her.

The bank in question, Alfa Bank (one of the biggest in Russia), says it is they who are the victims in this situation. It claims only three calls have been made to Katya, and none were intended to intimidate her.

“This is an unpleasant situation for us as well. We can only use the information the client gave us, and we have a duty to get our money back. In the end, we just want to locate the debtor, not put pressure on his relatives, but this is the best means we have,” says Oleg Kogan, head of the debt collection service.

Katya’s case is a classic symptom of deep problems in the banking industry. As the economic crunch continues unabated, and while both banks and their clients find themselves in a bind, the frequency of cases like Katya’s will increase.