The flourishing of the debt collection business resulted in a very unhappy, and sometimes very deplorable, communication with debt collectors for debtors. However, few people know that the inhumane actions of many collectors are against the law and can and should be fought against (while not forgetting the intensified attempts to repay the debt to the bank). What should decent collectors be? How to protect yourself from illegal actions? How can collectors be useful?
After changes in the tax legislation, which refers to the sale of debt portfolios by banks to collectors, the market for such transactions has significantly increased. According to the estimates of the European Debt Recovery Agency, over the past 4-5 months, banks have sold about UAH 1.7 billion. collection (financial or factoring) companies. This means that borrowers who have stopped paying on loans now have to communicate with debt collectors much more often than before. At the same time, at the peak of demand for collection services of the year, about fifty companies on the Ukrainian market position themselves as collectors, of which a little more than a dozen are large companies, the rest are quite small. And both the first and the second can use methods that are by no means “honest” when collecting debts.
Collectors are different
“A good collector is one who can convince an unscrupulous borrower to repay the overdue debt in full or in part in the shortest possible time, acting within the framework of the law,” says Andreas Marneris, director of the receivables management department at Universal Bank. – A good collector is also a consultant who is able to assess the real financial situation of the borrower and suggest the optimal solution.
At the same time, many banks understand that if the collectors to whom he turned, force the borrower to pay the debt “by force”, then this cannot but affect the image and reputation of the institution. However, in practice, it does not always turn out “humanely”.
“Collection business involves systematic and effective work aimed at debt recovery. Unfortunately, some market participants sometimes forget that this business should be located exclusively in the legal field, and the principle “all means are good in war” is unacceptable in the settlement of such issues”, – explains the existing problems Oleksiy Vuyko, deputy director of the department for work with problem assets individuals of VAB Bank. In such a situation, insufficient experience of companies, including in monitoring their own employees, is often “to blame”. “Today, many collection companies do not have experienced management and sufficient funding, which leads to low-quality construction of processes and weak control of these processes,” adds Roman Samoilyk, head of Platinum Bank’s collections department.
The existing problem in the field of debt recovery is also confirmed by representatives of reputable collection companies – fortunately, with forecasts of a change in the situation for the better. “As in any other business, there are companies in the collection services market that use unauthorized methods of working with debtors. As a rule, these are small one-day companies, for which the goal is to quickly repay the debt by any means, and not to ensure long-term relations with customers, borrowers and the absence of image risks, – explains Vyacheslav Golub, director of the Agency for Complex Business Protection “Delta M”. – Practice shows that even those companies that have earned the trust of banks, but in connection with the crisis use unauthorized measures to influence debtors, gradually lose customers, positions and begin to leave the market. By the end of this year, according to our forecasts, about 4-5 collection companies, which today call themselves professionals, will simply be forced to leave the market.”
And while the “natural selection” of collectors is not finished, debtors who have suffered from unscrupulous actions of “gray” collectors need to be able to protect themselves.
The reference point of integrity of collectors
The main and, in fact, the only rule of all decent collectors is to act within the framework of the legislative field of Ukraine. This sphere is regulated by a special law, the Constitution, the Civil and Economic Codes, as well as the Laws “On Business Societies” and “On Housing and Communal Services”. Also, the activities of collectors are regulated by the internal regulations of the company – they are often similar, but there are also differences.
The representatives of the collectors themselves single out the following possible violations in the work with debtors of some companies operating on the market:
- phone calls or visits during rest (officially, hours after 10:00 p.m. and before 7:00 a.m. are considered such);
- threats to the life, health, property of the debtor or his family members (including using profanity);
- intentional overestimation of the amount owed;
- violation of public order;
- application of measures that threaten the honor, dignity, business reputation and other non-property rights of the debtor;
- distribution of confidential information about the borrower.
At the same time, collectors are still obliged to convince you to return the debt. “Representatives of collection companies in the process of communicating with the debtor have the right and are obliged to inform him of the possible legal consequences of non-payment of the debt, namely: transfer of the case to court or forced recovery of the debt through the sale of property through the state (private) enforcement service,” explains Oleksandr Ilchuk, director of the European Debt Recovery Agency.
In order to compare the activities of Ukrainian collectors within the framework of permissible actions and to define unacceptable ones, there are Codes of Ethics of collectors. There are two codes operating on a national scale, developed by associations of collectors: the Association of Participants of the Collection Business of Ukraine (AKBU), which includes six Ukrainian companies, and the Independent Association of Ukrainian Collection Agencies (NAUCA), which unites nine companies. The code of the latter can be found in online access on the organization’s website. In addition, there are codes of ethics at the level of individual companies that have developed them independently (an example is the Code of Ethics of the Agency for Comprehensive Business Protection “Delta M”).
Such documents clearly state what is unacceptable when communicating with debtors. For example, the Code of Ethics of collectors from NAUCA obliges representatives of similar services, among other things:
- indicate the full address, telephone number and e-mail address on all sent letters;
- protect confidential information about the debtor;
- process all incoming complaints from debtors according to a certain procedure;
- not to use recovery procedures that may offend the honor and dignity of the debtor;
- if there are no special instructions and there are objective reasons why the debtor cannot pay the debt immediately – accept the debtors’ proposals to repay the debt in separate payments;
- do not hint, either in writing or verbally, at a criminal prosecution or a civil lawsuit, if there are no legal grounds for this;
- encourage debtors due to financial difficulties to inform family members about their difficulties in order to avoid conflict situations.
Examples of the internal Code of Ethics of one of the collecting companies are as follows:
- categorical prohibition of threats to the life, health, property of the debtor and his family;
- the duty of employees to provide only true information about the name of the company, terms and amounts of the debt;
- to avoid any actions that may deceive the debtor (including the prohibition to represent the executive authorities).
The conclusion from the above is as follows. If they “work” with such a borrower who has defaulted on a loan, going beyond the specified ethical framework, then it can be either an employee of a reputable company who violates the law and corporate rules (which is unlikely, because professional debt collection companies value their reputation), or – a representative of a dishonest collector company. “The specificity of the collection activity consists in strict compliance with the requirements of the current legislation. If “unethical methods” are applied to the debtor, then it is safe to say that it is a “black collector”. In such a case, the debtor has the right and must apply for legal assistance to protect his rights,” Oleksandr Ilchuk recommends.
How to protect yourself
Faced with the dishonesty of many collectors, associations of collection companies have developed their methods of helping debtors who have suffered from illegal actions. Thus, NAUKA accepts complaints on its website about collection companies that behave inappropriately. At the same time, all copies of correspondence and documents related to the complaint must be attached to the letter; specify how the company employee violated the NAUCA Code, and specify all dates and names of employees.
Another association of collectors – AKBU – has organized a 24-hour “hotline” for debtors, where victims can call – 044-590-04-37, and regularly analyzes the information received.
In addition to the above-mentioned possibilities to complain to associations of collectors, the range of instances to which you can apply in the event of a violation of rights is quite wide. “If the borrower realizes that the collector violates his rights, uses prohibited methods of influence or threatens to use them, he can resort to the same methods used to protect against encroachments by any other natural or legal persons, in particular, turn to his the employer (collection company), the creditor bank, to law enforcement agencies, the court and other authorities,” advises Vyacheslav Golub, director of the “Delta M” Complex Business Protection Agency.
A borrower with whom the collector communicates within the framework of the law, but who cannot repay the debt, also has a way out – you can try to split the payment into parts. As a rule, most representatives of debt collectors agree to this option, but have their own conditions for such restructuring.
For example, one of the collection companies agrees to split the payments over 12 months, but the pre-payment of 5% to 50% of the debt amount is a mandatory condition. “The main task of the collector is to help the debtor understand the situation, as well as to convince that the debt must be repaid. If the debtor has financial difficulties and is not ready to repay the debt immediately, the company’s specialists offer him to restructure the debt. In essence, the work of a collector is comparable to the work of a financial and legal consultant,” says Oleksandr Ilchuk, director of the European Debt Recovery Agency.
We turn to the services of the collector … ourselves
It so happened that for Ukrainians, debt collectors are mainly associated with overdue bank loans. At the same time, few people know that some collection services can collect debts for individuals as well – including the debts of other individuals. Of course, we are not talking about debts “for good faith” or under a receipt that is not certified by a notary, which cannot be evidence in court – but the vast majority of such debts, which are not supported by any legal grounds. And collection companies are not always interested in such cooperation, even if there is documentary evidence of the debt – because the costs of debt collection and court costs can be much higher than the commission that collectors can receive for their services. However, if going to debt collectors makes sense, then before entering into a contract, you need to make sure that the company will work with you at the proper level. “A company engaged in debt recovery is obliged, at a minimum, to inform the client of the methods and procedural order of debt recovery,” explains Vyacheslav Golub, director of the “Delta M” Complex Business Protection Agency. – In addition, she must inform the client about his legal rights; to clearly determine the scheme of payment for their services (percentage of the refund amount or a fixed amount for the provision of services) and state fees during court proceedings, as well as to inform the client about the progress of the case on an ongoing basis.”
