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Supreme Court forbade banks to assign indebtedness to debt collectors

14 April 2016

On 13 April, the Supreme Court of the Russian Federation made a landmark ruling which in fact prohibits banks to pass the information on a loan of the debtor to debt collection agencies.

"The Law On Consumer’s Rights Protection does not entitle a bank or another credit organisation to assign, without debtor’s approval, the right to collect debtor’s indebtedness under a loan agreement to persons without a license entitling them to execute banking activities, if otherwise is not stated by the law or an agreement comprising such condition, which was agreed upon by the parties when signing the agreement," the Supreme Court said.

During the consideration of the civil case based on the legal action from a collector’s agency to a married couple, Mr and Ms P., about the debt recovery, the Supreme Court questioned the right of debt collectors to call in the debt. The Court assumed that the information on loans is a bank secret. The debtor did not permit to declassify the information on the loan and, accordingly, did not entitle the bank to assign the right to call in his or her debt to debt collectors.

High Commissioner for Human Rights in Russia Ella Pamfilova repeatedly spoke about the need to strictly regulate debt collectors’ activity though legislation. A few draft laws have been pending approval of the State Duma until recently, but none of them suggested a complex solution to the problem.

On 10 February, the High Commissioner petitioned Chairman of the Government Dmitry Medvedev to facilitate the introducing of the draft law On Debt Collecting Activity to the State Duma — the draft law was being examined by the Cabinet of Ministers for a long time. Also the High Commissioner petitioned Chairman of the Central Bank Elvira Nabiullina in view of the negative situation related to the debt collectors’ activities.

On 17 February, speakers of the both chambers of the State Duma, Valentina Matvienko and Sergey Naryshkin, submitted the draft law On Protection of Rights and Legal Interests of Natural Persons upon Debt Collecting which was adopted during the first reading on 12 April. The document comprises a detailed regulation of interaction between debtors and debt collectors, and also obliges the Government to choose a body to regulate and control debt collectors’ activities and keep a registry of debt collection agencies. Violators will be excluded from the registry.

According to the draft law, a collector will have the right to call the debtor not more than two times per week and to hold personal meetings not more than once a week. The draft law also does not allow to apply physical force, threaten, psychologically pressurise and misinform the debtor. Debt collectors will be forbidden to interact with minors and incapable persons, reveal information on the debtor to third parties and publish it on the internet.

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