Credit amnesty in 2023 for individuals – Finance – Kommersant

Whether an amnesty for loans is applied in Russia, how it can be used and what are the prospects for this innovation – in the material “Kommersant”.

What is a credit amnesty

A credit amnesty is a complete and unconditional write-off of principal and interest on a loan. This measure excludes the possibility of a reminder of further collection. That is, under the amnesty, banks and microfinance organizations will not be able to return their money. The conditions that are necessary for a decision on a loan amnesty are established by Government Decree No. 373 of April 20, 2015. The latest version took effect on October 13, 2018.

Currently, credit amnesty is not widely used in Russia. According to federal law No. 127-FZ, bankruptcy remains the only legal method for liquidating debt. Since 2015, it has become available to individuals, and from 2020, certain categories of debtors can go through the procedure in a simplified manner.

An amnesty would be an ideal debt relief option for borrowers. However, the cancellation of numerous debts is not beneficial to either banks or the state. Several times such proposals were submitted to the State Duma for consideration.

In early March, the deputies of A Just Russia – For the Truth submitted to the lower house of parliament a bill on a credit amnesty for citizens who find themselves in a difficult life situation. The document states that the borrower must confirm that, for example, he is poor, officially recognized as unemployed, his income has fallen by more than 30%, his number of dependents has increased, or he is recognized as disabled. First of all, it is microloans that fall under the law on credit amnesty, since they have the most unfavorable terms of debt obligations and too high interest rates.

Why a large-scale credit amnesty is unlikely

There are several reasons. The main thing is that a mass amnesty for loan obligations contradicts the very essence of the financial sector, since banks will not be able to return their money. Forgiveness of debts to malicious defaulters puts in an unequal position conscientious borrowers who regularly make payments (in fact, it is at their expense that banks and MFIs cover the risks of default on other loans). In addition, a global credit amnesty will breed a huge number of unscrupulous borrowers.

Credit amnesty is a rare financial instrument used in exceptional cases. Most often, it affects the most vulnerable segments of the population:

– large families;

– pensioners;

– people with disabilities;

– orphans;

– Citizens receiving survivor benefits.

How to use credit amnesty

In each case, borrowers are subject to special requirements. Much depends on the degree of state intervention and the category of citizens. Often, the debts of only a small part of the population (from 10% to 20%) fall under the write-off. One of the most important selection criteria for obtaining a credit amnesty is the amount of debt: usually it should not exceed the equivalent of $1,000.

In addition, such assistance is provided only to those who are unable to pay off their debts on their own. Regulatory authorities will definitely require documentary evidence of the insolvency of such a person, and will also try to establish the presence of deliberate actions to sabotage payments.

Such programs are usually aimed only at citizens of a particular country, respectively, people temporarily residing or working in the territory of such a state will not be able to use them. In rare cases, banks write off the debts of borrowers on their own, but for this it is necessary to achieve recognition of the bad debt obligation. Therefore, in order to write off debts under a loan amnesty, it is necessary to comply with a number of strict requirements of the program, monitor changes in national legislation and submit a comprehensive package of documents in a timely manner to initiate the procedure. It is important to remain in the legal field and be open to supervisory authorities.

Mikhail Alekseev, expert of the Fund “For the Rights of Borrowers”:

– There is no current legislation. Today, credit amnesty is only a slogan, a wish of some politicians. There is legislation and practice on bankruptcy – judicial and simplified, there are credit holidays, there is a moratorium on bankruptcy and enforcement actions. Perhaps, under such statements, a marketing policy is carried out by lawyers who deal with bankruptcy.

So far, a credit amnesty implies the lack of rights of one of the parties – the one that lent money. But even in bankruptcy, the parties have equal rights. We have not seen the bill, but so far not a word has been said about what compensation and from what sources the creditors can receive. With this logic, creditors may not fulfill their obligations further down the chain: to depositors, to other banks and the Central Bank.

Now in Russia there is a moratorium on enforcement proceedings, where the situation is similar. Borrowers have received a breather, but the second group of participants in this economic process – creditors – cannot fulfill their obligations. Not being able to return their funds, issued on time, banks stop working with this category of borrowers. They are not kamikaze. As a result, banks either refuse new loans or worsen their conditions by raising rates. And for those who have received a deferral, they close existing limits, for example, on bank cards.

We have a practice about credit holidays introduced during the pandemic, when you can postpone all payments for six months: principal, interest, fines and penalties. But it has not been analyzed in terms of its results and the need for additional tuning. So far, there are no general statistics. How many people got? And what happened next? Did the borrowers use this time to improve their financial condition and start paying? Or filed for bankruptcy?

Marina Kolokolova; Andrey Perevezentsev, Direct Speech group