What to do if the bank has turned to collection agencies

Who collectors are

When a creditor mentions turning to collectors, they mean a collection agency (major banks refuse to cooperate with individual debt collectors). Such organizations are completely legal, licensed, and, as you already understand, negotiate with the borrower to recover the debt.

After a number of high-profile cases, hearing the word "collector" makes citizens picture bandits literally shaking money out of a debtor by any means possible. That is how it was in the 2000s, when the actions of collection agencies were not regulated by anyone or anything.

Now, however, the work of these organizations must not contradict Federal Law No. 230-FZ of July 3, 2016, "On the Protection of Rights and Legal Interests of Individuals in Carrying out Activities for the Recovery of Overdue Debt and on Amendments to Federal Law No. 230-FZ 'On Microfinance Activities and Microfinance Organizations'." Today, essentially, collectors act merely as financial consultants who inform debtors of the consequences of non-payment.

Any collection agency operating within the Russian Federation must be included in the register of the Federal Bailiff Service and have constituent documents indicating that it engages in overdue debt recovery activities.

Can a bank sell a debt to debt collectors

The assignment of claims is one of the final measures of pressure on a defaulter. It is preceded by calls to the borrower, in-person meetings, and going to court. Selling a debt to a collection agency only makes sense if none of the options listed above have helped. And this measure is legal if the corresponding clause is stipulated in the cession agreement.

As practice shows, the decision to assign claims to collectors is made if the last loan payment was made more than a year or even two years ago. Creditors rarely transfer fresh consumer loans to collectors, because the latter buy them for pennies, and if the borrower makes at least a few more payments, it will be significantly more profitable for the bank.

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Who must notify the debtor of the assignment of claims and when

The debtor has the right not to comply with the demands of the collection agency and not to repay the debt if they were not notified of the sale of their debt to third parties. Therefore, when assigning claims and transferring information, the bank must first send the borrower a written notice indicating the details of the new creditor and their payment instructions. Moreover, the debtor must be notified by registered mail, as notification via calls or SMS messages has no legal force.

The collection agency may also inform the debtor about the reselling of the debt, but in this case, the debtor has the right to request proof of the transfer of claims. Until they receive such proof, they can pay the bank directly.

First steps of the debtor

If the debtor has received notice that their loan debt has been sold to a collection agency, they should act in the same way as in the case of recovery by the bank. That is:

1. First of all, if the borrower received notice of the assignment of claims directly from the collectors themselves, they have the right to request proof. Until they receive it, they can choose not to comply with the collectors' demands.
2. After receiving proof, it is best not to ignore the collectors' attempts to contact the debtor — by agreeing to negotiate, the borrower gets the opportunity to arrange an installment plan with the collectors or pay only the principal debt without taking into account interest, fines, and penalties.
3. If the collection agency rejects requests and refuses to compromise, the borrower can wait for court proceedings. This gives them a chance to reduce the payment. But in this case, the debtor must be prepared for the court bailiffs to get involved, who have the right to seize accounts and property, withhold 50% of wages, or restrict travel abroad.

Which collector actions are legal and which are not

The legality of collection agency actions in the Russian Federation is regulated by Federal Law No. 230-FZ, Chapter 2, "General Rules for Performing Actions Aimed at Recovering Overdue Debt." According to it, persons acting in the creditor's interest have the right to interact with the debtor through:

• in-person meetings and telephone conversations;
• voice, text, and telegraph messages;
• postal mail.

Moreover, the collection agency is obligated to inform the debtor of the permissible methods of interaction. Thus, all of them must be specified in the agreement.

In addition, collectors may also interact with third parties (usually the borrower's close relatives). Provided, of course, that this does not contradict two conditions: the debtor has given consent to their being informed, and the third parties themselves do not object to such actions.

Collection agencies are permitted to influence the debtor by any means that do not contradict Article 6 of this Federal Law. The following actions are prohibited:

1. The use of physical force or threats of its use.
2. Damage to or destruction of the borrower's property.
3. The use of methods that may be dangerous to human life or health.
4. Psychological pressure on the debtor.
5. Misleading the borrower regarding the amount and terms of debt repayment, the consequences of failure to fulfill obligations, etc.

Overdue debt recovery activities must also be suspended in cases where:

• the court has declared the debtor bankrupt;
• the borrower is incapacitated, a Group 1 disabled person, or undergoing inpatient treatment;
• the debtor is a minor.

In addition, the law establishes time frames within which debt collectors may interact with the debtor. In the case of personal meetings and communication, the following conditions apply:

• they must take place no earlier than 8:00 AM and no later than 10:00 PM on weekdays, and no earlier than 9:00 AM and no later than 8:00 PM on weekends and public holidays;
• personal meetings may be held no more than once a week;
• telephone conversations no more than once a day, twice a week, and eight times a month.

While text, voice, and telegraph messages are subject to the following restrictions:

• the time frames are the same as in the previous case — that is, from 8:00 AM to 10:00 PM on weekdays, and from 9:00 AM to 8:00 PM on weekends and public holidays;
• the frequency of notifications must not exceed twice a day, four times a week, and sixteen times a month.

Answering frequent questions

So, we have already explained who debt collectors are, on the basis of what legislative documents they operate, and what a debtor should do if the right to claim their debt is assigned. In conclusion, we will answer the most frequently asked questions regarding the work of debt collection agencies.

Where to go in case of unlawful actions by debt collectors?

If a collection agency repeatedly violates the law — that is, disturbs the client more often than the established period or at night, makes threats, damages property, etc. — the borrower can complain about the collectors to the prosecutor's office. Relatives or close associates of the debtor can also file a statement if their rights are violated.

In such cases, debt collectors will face punishment in the form of:

• a fine of up to 500,000 RUB;
• exclusion from the register of the Federal Bailiff Service and a ban on debt collection activities.

Is it legally possible not to pay debt collectors?

If the collection agency has completely bought out the debt from the bank, it becomes the official creditor. That means the debt will have to be paid in any case. Moreover, it does not matter much whether you do this at the first request of the collectors or wait for a court appeal. But do not forget that after court proceedings, bailiffs will be brought into the case with all the ensuing consequences in the form of seizing a salary account, recovering the debt from official salary, and so on.

How to verify the legality of a collection agency's operations?

If the debtor doubts that their debt was actually sold to collectors and suspects that fraudsters are trying to negotiate with them, it makes sense to check the legality of their operations. First of all, you can try to find them in the Federal Bailiff Service register. The absence of data may indicate that the borrower is dealing with illegal debt collectors whose activities are unlawful. The second way to make sure that the collection agency actually bought the debt is to visit their office and personally review the assignment agreement.

What to do if the statute of limitations has expired?

The statute of limitations is 3 years and is calculated from the date of the last expected loan payment. That is, if the debtor was obligated to close the loan on January 19, 2017, then in 2021 the collection agency will not be able to recover the debt from the borrower through the court. Moreover, the debtor themselves can file a lawsuit if the collectors do not stop trying to achieve payments after the expiration of the statute of limitations.

In what cases will enforcement proceedings be terminated?

Actually, there are few such cases. That is, most often it will not be possible to avoid paying the loan. So, the grounds for terminating enforcement proceedings are:

• death of the borrower;
• the creditor's waiver of overdue debt recovery;
• impossibility of fulfilling the requirements (that is, when the debtor has no property or income whatsoever).