Neither a friend nor an enemy, but a duty

Bankers criticized the draft decree banning the collection of overdue debts of individuals to organizations whose owners include representatives of “unfriendly” countries. As a result, in their opinion, problems in interaction with debtors will arise not only among subsidiaries of foreign banks, but also simply among public credit institutions, whose shares may belong to non-residents. The collection services market is expecting a redistribution of property in companies with foreign participation.

The National Council of the Financial Market (NCFM) has prepared an opinion on a draft presidential decree developed by the Ministry of Justice banning financial organizations associated with non-residents from “unfriendly” countries from acquiring overdue debts in the Russian Federation. The document, published in mid-January, states that it concerns collectors, banks and microfinance organizations, the founders or participants are such persons. The NSFR’s appeal was sent to the ministry on January 29.

As Denis Primakov, head of the “Sanctions Law and Compliance” practice at the KIAP law office, explained, the concept of “participant” is broader than “founder”. In joint stock companies, for example, the participants are all shareholders. Moreover, the draft decree is drawn up in such a way that it covers not only subsidiaries of foreign banks, such as OTP-Bank or Raiffeisenbank, but also simply public joint-stock companies (PJSC), such as Sberbank and VTB.

The letter emphasizes that financial organizations do not support the project as presented. As the head of the National Financial Markets Service Andrey Emelin explained, the introduction of the ban will have a negative impact on the consumer lending market. “Individual borrowers on issues of overdue consumer loans prefer to interact with creditors rather than with collectors, since banks are traditionally more attentive to clients,” he clarified. According to Mr. Emelin, the adoption of the decree in its current form will lead to the fact that creditors will not be able to communicate with debtors regarding debt repayment. Namely, as a result of such communication, the head of the National Financial Markets Service emphasized, they often agree on debt restructuring with banks.

If a ban is introduced against banks with foreign participation, according to Andrei Emelin, the burden on the courts of general jurisdiction, which is already significant, will significantly increase: “Either banks will have to transfer the function of returning all overdue debts to collectors on an ongoing basis, which will lead to additional costs for borrowers.”

For a number of credit institutions with foreign participation, the head of the National Financial Markets Service added, the introduction of the ban “will have a significant negative impact on one of the key areas of their business – consumer lending to the population.” “Potential negative consequences include an increase in delinquency, the creation of additional reserves that put pressure on capital, and a decrease in the volume of consumer loans,” explains Andrey Emelin.

As explained by the National Association of Professional Collection Agencies (NAPCA), in the early stages (up to 30 days) with overdue debt, banks work independently, using a standard set of tools: messages to clients and, in some cases, calls using a “robot”. “However, after a while, these tools are no longer enough, and it is necessary to start working with the debt individually, considering each case separately and developing a repayment scheme. At this stage, professional collection organizations are involved, which have technology and experience in working with debts of varying levels of complexity,” NAPCA explained.

Collectors themselves are primarily expecting a redistribution of the market from the new norms. Kommersant’s sources among the players are confident that the decree in its current form will be adopted in February. “Collection agencies with the participation of foreign shareholders have no choice but to prepare to sell the business,” notes one of Kommersant’s interlocutors. In his opinion, in the near future we can expect a large number of transactions to change the ownership of collection agencies.

Maxim Builov, Polina Trifonova