Which MFIs take debtors to court?

Do MFIs sue debtors?

Many clients of microfinance organizations wonder: will the company go to court in case of arrears on a microloan? There is no definitive answer here — it all depends on the policy of the MFI you applied to.

Some organizations find it easier to resell the debt to collection agencies. Especially if it is a small amount and if you have not made payments for a long time. Other companies prefer to sue borrowers in

When do MFIs most often sue debtors?

Debt recovery through the court is a rather complicated and lengthy process, and therefore it is used by microfinance companies as an extreme measure of influence on the debtor.

Going to court is preceded by attempts to recover the debt out of court. In particular, some MFIs try to influence the debtor psychologically: they press on the sense of guilt, contact relatives and colleagues, threaten personal meetings, criminal prosecution, and so on.

If the borrower refuses to voluntarily return the money, and the MFI does not want to sell the debt to collectors, the case is referred to court. This usually happens in the following cases:

1. If the total amount of debt along with interest and penalties exceeds 100,000 rubles. This is a large enough loan to transfer to collectors or forgive the client's debt altogether.
2. If the borrower has not paid money for several years and the statute of limitations is expiring. The creditor has only three years from the moment payments stop to recover the money from the debtor through the court. In fact, an MFI can file a claim later, but with a high probability they will be refused the initiation of the case.
3. Если заемщик отказывается идти на контакт с микрофинансовой организацией — не берет трубку и игнорирует личные встречи. В таком случае МФО не остается ничего, кроме как обратиться в суд.

Why some MFIs do not sue

Often on the web you can read that some microfinance organizations prefer not to go to court — they delay filing a claim as much as possible or completely miss the statute of limitations.

Often you can read this about some new or small company. The fact is that drafting a claim is not a simple process. The text of the application must be written in such a way that the judge has no doubts about the debtor's guilt. An ordinary person cannot do this, so claims are drawn up by lawyers. Either staff lawyers or external ones. A new or small MFI simply may not have the money to pay for a specialist's services.

In addition, microfinance organizations are highly unlikely to go to court if they realize there is nothing to recover from the debtor—they have no job or valuable property. In such cases, the MFO simply sells the debt to collectors.

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What to do if an MFI goes to court: a step-by-step guide for debtors

If the microfinance organization has nevertheless filed a lawsuit against you, do not try to ignore attempts to contact you. In addition, try to attend the court hearing—you may be able to get the debt amount reduced.

In general, we advise debtors to do the following:

• consider all MFO offers for out-of-court settlement of the dispute—this way you can agree on installment payments, reduced interest or penalties;
• not ignore MFO attempts to contact you and always receive court correspondence on time—this way you can exercise your rights as a defendant;
• point out inflated interest rates, violations of legislation by the microfinance organization, expiry of the limitation period, and so on.

What punishment can the court impose?

The judge can make one of three decisions:

1. Find you guilty. In this case, you will have to fully repay the debt to the creditor.
2. Find you guilty, but soften the debt repayment terms. In this case, the judge may reduce the amount of accrued interest or cancel fines and penalties.
3. Find you not guilty. Then you will not have to fulfill your obligations to the MFO.

If the court finds you guilty, you have only 5 days for voluntary repayment of the debt from the moment you receive notice of the enforcement proceedings. After that, bailiffs will collect the money from you. In particular, they may send a writ of execution to your employer to withhold part of your wages, freeze your accounts and cards, restrict travel abroad, and sell valuable property.

Which MFIs sue?

It is impossible to say exactly which microfinance organizations never sue debtors—there is simply no such list. They may “forgive” the debt for one borrower, while another will have to repay the microloan through bailiffs.

But one thing is certain: large MFOs with enough experience in handling such cases are highly likely to go to court. New microfinance companies, on the contrary, are more likely to prefer to transfer the loan to collectors.

Illegal MFOs are also highly unlikely to go to court, since their activities are illegal and they cannot lend to individuals. For this reason, they will rather try to exert psychological pressure on you.

Let's sum up. It is impossible to say exactly which MFOs do not sue debtors—any organization operating legally can do so. Everything depends on the debt amount, the length of the overdue period, and whether the organization has experienced lawyers on staff.