Debtors will be protected from unscrupulous collectors by the law

Nowadays, credit financing is an important element in the organization of macro- and microeconomic, civil-law and public relations throughout the world and in Ukraine in particular. However, because of the instability of the banking system provoked by the economic crisis and a number of global challenges that our country is facing now, another pressing problem arises – the untimely return of credit funds.
Under these circumstances, banking institutions have no other option than to take certain measures against unscrupulous debtors, resorting in particular to the services of the so-called collectors whose activities in Ukraine have no legal basis. This issue must be addressed immediately, because the number of problem loans is growing, and, therefore, it is necessary to look for legal ways to have them repaid.
Having analyzed the foreign experience we see that the professional activity connected with arrears repayment (in other words – the collection business) has existed for more than a century, and it makes up an integral part of the financial systems of many countries. Thus, in France, Croatia, the Czech Republic and other European countries the repayment of arrears is regulated by general norms of civil (commercial) codes. Some states have special laws that regulate the activities of collectors.
In the United States, the collection activity is regulated by the Fair Debt Collection Practices Act dated 1978. Its goal is to streamline the activities of debt collectors and combat illegal collection of debts. In particular, the law declares illegal the use of threats, physical harm to the debtors, their kith and kin or property, the threats to spoil their reputation, the use of insults and indecent expressions in conversations with the debtors, the use of constant phone calls that aim at making the debtors pay, etc. The law also provides for the liability of the collector in case of violation of the provisions of this law.
Today, collection agencies in Ukraine are not controlled by anyone. The activities of collectors in terms of interaction with the borrowers and obtaining information necessary for their work are not regulated either. The absence of a clear legislative regulation of collection activities leads to the fact that the methods used by collectors, unfortunately, cannot be called professional. Often they can be qualified as the ones that degrade human dignity, contain threats that exert psychological pressure on the debtors themselves, their families and friends.
The current legislation does not contain direct general norms that characterize the signs of unfair practices and actions used by collectors in the process of making debtors pay back the arrears. Moreover, there are no legislative mechanisms aimed at preventing actions that could violate the rights of debtors, there is no compensation mechanism for the harm caused by illegal actions of collectors. Neither there is an algorithm of holding accountable the persons who deliberately divulge personal data of debtors, threaten the life or health of debtors and their relatives, threaten to damage or destroy their property.
That is why the state has to take care of a modern legislative regulation of the collection services market, which will ensure the observance of the rights of both debtors and creditors, and will set civilized rules for the return of funds to the lending institutions.
With the purpose of creating a legislative basis for the activities related to the repayment of arrears (including those carried out on a professional basis) – which would both provide for the interests of creditors and protect the rights and interests of debtors – a draft Law of Ukraine “On the specifics of professional activities related to the overdue debts settlement” No 6417 has been developed.
The bill is aimed at regulating the recovery of debts of legal entities and individuals (including individual entrepreneurs) in terms of the ways of interaction between the creditor, the party that directly deals with the debt recovery and contacts the debtor to ensure a balanced protection of rights and legitimate interests of all participants in this relationship. Particular attention is paid to the rights of debtors which can be violated because of the use of unscrupulous methods.
The process of debt recovery by companies that provide such services to creditors is not only about collecting debts, but also about negotiating with debtors.
The draft law proposes to establish a clear framework of ethical and professional communication with the debtor in the process of debt recovery.
Now only a qualified specialist who passes an exam on the settlement of arrears and receives the corresponding certificate will have the right to carry out collection activities. Examinations are carried out by a qualification commission, the composition of which is approved by the Ministry of Justice. The Ministry of Justice ensures the maintenance of the Unified state register of overdue debt settlement entities. In addition, a penalty of 100 to 150 non-taxable minimums for collection activities without entering data about the collection company into the register is introduced.
The bill introduces criminal responsibility for coercion of debtors to pay off debts by means of threats of violence, threats to damage the debtors’ property and do harm to the members of their families, as well as to publicly disseminate intentionally unreliable information about debtors.
A specialist in debt settlement is prohibited from using force, using obscene words, threats, phrases that offend the honor and dignity of the debtor, and any other means that are intimidating by their nature. In addition to this, the specialists are forbidden to collect and publish information about the nationality, political views, religious preferences and the state of health of debtors. The bill introduces a restriction on the number of personal contacts with the debtor, the phone calls, the procedure and form of correspondence.
This bill introduces a new system of legal regulation of collection activities taking into account the interests of debtors and clearly defining the transparent mechanisms of the work of creditors and persons who solve issues of overdue debts and directly contact debtors.
Adoption of the Law of Ukraine “On the specifics of professional activities related to the overdue debts settlement” is the first step towards a civilized approach to resolving the problems of debt recovery by legal and fair methods fixed at the legislative level.

Oleksandr Opanasenko
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