New Debt Collection Regulations Introduced in Russia

The legitimacy of debt collection agencies activity has been discussed in the State Duma of the RF for a long time. This situation was finally brought to a conclusion on March 23^rd, 2016 with a new law regulating the activities of the debt collection industry.

On February 18, 2016 at the initiative of the Chairmen of both Chambers of the Federal Assembly, a number of bills concerning the protection of citizens from unfair practices by debt collection companies were introduced to the State Duma. On 23th of March, 2016 the Bill № 999547-6 «On protection of rights and legitimate interests of individuals in the implementation of activities on debts collection» was discussed at the meeting of the Property Committee and was subsequently recommended for consideration at the plenary meeting, which was held on April 12, 2016. After discussion the Bill was passed by deputies at the first reading.

According to the Bill, the Government of Russia must appoint a regulator vested with rights of maintaining the register of collectors and enforce compliance. The interaction order of a collector with the debtor, concerning banks, microfinance organizations, other creditors and individuals providing debts collection is now regulated.

For violations of this regulation penalty at the rate of US$30 thousand is fixed.
The limitations on interaction with debtor are imposed on collectors: on amount of calls – not more than twice a week; on personal meetings – not more frequently than once a week. Interaction with the disqualified, citizens hospitalized in health care institutions, the disabled, individuals under the legal age is forbidden. Interaction outside the borders of Russia and the use of facilities concealing its telephone and e-mail address, and also interaction with debtor at nighttime are also forbidden.
A debtor has the right to appoint a representative, or any other individual or legal entity authorized to act on behalf of the debtor throughout the debt collection process. A debtor can refuse any interaction with a debt collection agency. In this case, when the discretionary payment period has passed, only legal action will be possible.
Disclosure of personal data about debtor to collector, gained by means of the debt claim from a credit organization, is only allowed with the written consent of the debtor.
Individuals having a criminal record for crimes in the sphere of economic and public security, and also managers with a bad business reputation cannot be involved in debts collection.
Legal entities can be engaged in this activity only with the authorized capital in the amount not less than US$ 154 thousand providing that it is their primary activity.

Backgound: In March of 2010 a State Duma Committee on Property organized a round-table discussion of legislative aspects of introducing the personal bankruptcy concept in Russia. In the course of discussion legislators criticized the absence of regulations of collection agencies. The absence of regulations governing the activities of credit organizations with debtors-individuals meant that the companies operated in a legal void.

On the 6^th of April, 2012 hearings were held by the Property Committee on the subject: «Legislative aspects regarding regulation of rehabilitation procedures applicable to citizens-debtors». Participants in the hearing were the State Duma Deputies, the Council of the Federation members, representatives of the Ministry of Economic Development and Trade of the RF, the Federal Bailiff’s Service, Russian Bankers’ Association and the RF Presidential National Association of Professional Collection Agencies.

Furthermore round-table discussions on the debt collection bill were held by the Committee for Economic Policy, Innovative Development and Entrepreneurship on October 8, 2015. At the center of discussions were unsavory collection practices. In the course of plenary meetings of the State Duma on December 18, 2015 and on January 20, 2016 several deputies suggested restrictions or legislative limitations for collection activity in Russia.

According to the experts of the Information agency Credinform, the new regulations will lead to fundamental changes of the collection services market in Russia.

For example, according to the Information and analytical system Globas-i® (http://www.credinform.ru/en-US/globas), there are more than 890 active organizations registered specifying in their company name the definition «collection agency». Only three of them registered for their primary activities the OKVED 74.87.1 («Collection of payments, solvency assessment in relation to the financial condition or business practices of an individual or a legal entity») according to the Russian National Classification of Economic Activities. The authorized capital of these three organizations ranges from US$150 to 300.