The Law on Consumer Protection in the Settlement of Overdue Debts has been in force in Ukraine since 14 July. Now, debt collectors will have to abandon the usual scenarios of forced debt redemption. In particular, it is forbidden to infringe in any way on the rights and freedoms of a debtor. Debt collection companies have no right to resort to blackmail, violence, threats to harm the family or reputation. However, won’t the protection of Ukrainian consumers remain only on paper? Promote Ukraine found out the opinion of the legal community.
Valentyna Terekhova, director of OMI LAW GROUP
So far, at least, clear rules and limits for the activities of debt collection companies have been set, defining the requirements for impeccable business reputation both of the companies themselves and their immediate superiors. And most importantly, strict NBU’s control over the activities of such enterprises has been established. If registered companies violate statutory requirements, they will be deprived of the right to engage in this type of activity.
It is no secret that collectors resorted to various methods of psychological pressure on debtors and their family members. The purpose – paying back loans – did not justify the means: threats, calls to relatives, employers, and so on. Such actions can be qualified as the invasion of privacy, violation of civil rights and freedoms, neglect of human dignity. In this regard, a person is protected by Articles 3, 21, 22, and 32 of the Constitution of Ukraine, Articles 3, 291, 301, 302, and 308 of the Civil Code of Ukraine, and Article 182 of the Criminal Code of Ukraine.
Oleksandra Kravets, lawyer at Primelex
The initiative of the state to regulate the activities of debt collection companies and to stop their arbitrary actions should have a positive impact. However, in our opinion, it has only a formal reflection.
Indeed, all companies that were engaged in overdue debt settlement on the day of entry into force of the relevant legal requirements and planned to continue this activity, had time (from 14 July to 13 August 2021) to submit to the NBU the necessary documents to be included in the register of debt collection companies.
As practice has shown, there were not so many applicants and even fewer companies managed to legalise their activities.
For ordinary people, this process took place almost imperceptibly. However, the number of complaints from customers who have loan and mortgage debts has not decreased. Time will tell what happens next.
We can assume that the companies already included in the official register will follow the established rules as their activities are clearly defined and subject to the law, and hence to sanctions.
However, there is still a great risk of facing collectors who will continue to work informally and according to the old rules. Unfortunately, the newly adopted law does not solve this problem, and the fight against such “pests” remains the duty of the law enforcement system.
It should be noted that the process of transition of overdue debt settlement to a transparent legal field is very long and requires active action from market participants.
Oleh Slobodianyk, senior partner at Slobodianyk and Slobodianyk Law Firm
It is clear that properly registered debt collection companies at the first stage will become legal advertising banners for existing unscrupulous collectors. Not least because of the competitive advantages of illegal methods of coercion to fulfil civil law obligations over legal ones.
At present, creditors are actually deprived of effective judicial protection of their rights. Criminal proceedings over fraudulent seizure of loans are not investigated.
It should also be borne in mind that one of the reasons for the existence of illegal collectors is a mess in the financial market of fast loans, rates of which exceed 700%! Despite the fact that the courts have repeatedly acknowledged the illegality of excessive rates, the state continues to ignore this problem.
Thus, the first steps in regulating the market of collection services are only a stage of recognising the problem.
In the long run, the desire of collection company owners to develop a legal business can lead to the formation of first semi-legal and then licit collection companies, which will not only follow the legal methods but also develop the necessary regulations.
Natalia Ivanenkova, lawyer
By law, when first interacting with collectors, consumers no longer have to “extract” information about which company is bothering them and what is the reason for such a call. Debt documents must also be sent upon request. All conversations or meetings are now recorded by audio or video. Ideally, the entire process of interaction takes place with the prior consent of a consumer.
Interestingly, collectors are prohibited from misleading a consumer that if a debt is not repaid, they will go to court and the police.
I encountered cases before when collectors sent examples of alleged statements for the police about the prosecution of creditors with an illustration of barbed wire on a statement. That produced the most terrible effect on customers.
However, if there are complaints about the work of collectors, they should be done in writing and submitted (preferably with evidence) to the NBU.
Oleksandr Kudriavtsev, director of Oleksandr Kudriavtsev Law Bureau
The authorities try to channel the debt collection activities into a more or less legal area with the help of this law. Namely, the NBU is obliged to form and keep a register of debt collection companies. At the same time, banks and other financial institutions are prohibited from cooperating with a collection company if it is not in this register. In addition, the law obliges a collection company to build a civilised relationship with debtors. Thus, at the first contact with a debtor, a collection company is obliged to disclose its name, name of the representative, the legal basis for the interaction, and the amount of overdue debt.
In this case, if a debtor requests confirmation (evidence) of the debt, a collector must provide all supporting documents within seven working days. For violation of these requirements, a collector faces a fine of UAH 50,000 – 100,000 and exclusion from the register of debt collection companies. It is a definite advantage for a consumer because the relationship becomes more open and a debtor will have all the information about the debt from the very beginning.
I believe that despite the adoption of the law on collectors, the illegal actions of collection companies will continue. It is unprofitable to work under the law because it takes much time. Collectors buy debt portfolios from banks, invest their funds, and are interested in paying off the costs and making a profit as soon as possible.
But doing so quickly requires blackmail, threats, intimidation, calls to relatives, the use of “black” notaries and “puppet” private executors to block the debtor’s accounts, sending letters to relatives threatening to seize all their property, which is impossible under the law, and so on. However, now a debtor has legal ways to combat such actions of collectors.