The Bank of Russia in its latest report of August 2020 indicated that the debt burden of the population is gradually decreasing. But the regulator expects that the number of Russians who have several loans and microloans at the same time will grow. This in turn means that debt collection agencies will have something to work on. About the situation of the professional debt recovery market in 2020 and how it may change in the future, the news portal DEBT.RF spoke with Fedor Vachata, the CEO of the debt collection agency “M.B.A. Finance”.

– Fedor, tell us what has changed in the debt collection market in 2020?

– the 2020 has become a serious test for the entire debt collection market. And this is due not so much to changes at the legislative level, but to the pandemic. We work with personal data, we have huge call centers with a large staff of operators, and the transition to a remote format of work for our sphere of activity is a great and significant step.

The most anticipated change of this year is the amendments to Federal Law FZ-230. At the legislative level, there were many discussions on the work of debt collectors, public support, and mechanisms for controlling and regulating the industry. We returned to the discussion of the implementation of private bailiffs’ institution in the country and discussed interaction with the courts and the Federal service of court bailiffs. I am sure that this work will have a significant impact on the debt recovery industry and all its participants.

– How has the behavior of debtors changed during the coronavirus pandemic?

– In the pandemic period debts have been overdue by the borrowers who have faced with financial difficulties. This is the category of citizens who could not provide payments on loans or, conversely, the loan was taken out during a period of difficulties to maintain the standard of living. In most cases, this category of debtors is in touch and ready to fulfill their obligations as soon as their current situation changes. In addition, the consumer behavior of citizens has changed: in the situation when leisure facilities are closed, there is no opportunity to go on vacation, finances have been released, which many people preferred to use for paying debts.

– Do debtors often appeal to debt collectors directly, asking to purchase their debts?

– Not often, but there are such cases. Debtors apply to a debt collection agency with the question of purchasing all their existing debts. In the market, we see that the number of such requests has increased to 3% this year. Really, it is more profitable for the debtor to communicate with one creditor – it is possible to agree on the terms and the amount of payment. Debtors who have debts in different credit institutions often request a lender for refinancing. But if such loans are overdue, the lender is less likely to meet the borrower halfway.

Debt collectors could become an organization that would unite all problem loans of a debtor. From this point of view, it is profitable for debt collectors to combine debts – it increases the probability that a debtor will be able to repay all his debts. But this scheme has some nuances: it is not profitable for banks to sell individual debts, and it is also not profitable for debt collectors to purchase them, since the cost of such lots will not cover the costs for further work on them.

This issue has been repeatedly raised among the debt collection and banking communities, but at the moment there is no developed scheme of interaction. Banks sell debts as part of the cession in lots of several hundred cases and hardly agree to sell individual debts. As far as I know, the option of exchanging debts on the secondary cession market was discussed, but the question remains open.

– What is about credit vacation? Were they issued by debt collection agencies following the example of banks and other credit organizations?

– I know that many debt collection agencies have taken on the responsibility of supporting the population in this difficult period. Although we were not mentioned in the law on granting credit vacations, we also issued them to borrowers who suffered from a decrease in income, loss of work or illness during the pandemic. Under the cession agreements, when debt collection agency is a direct creditor of a debtor, it has an opportunity to provide a debtor with installments, vacations, change an amount of payment and repayment terms.

If we talk about companies working under agency-based agreements (particularly, M.B.A. Finance), then we act in strict accordance with the lender’s policy and receive appropriate instructions on how to act in every concrete situation. We have no right to provide credit vacations independently, somehow change the format of debt repayment. When a debtor applied for a credit vacation, all information was immediately transmitted to the creditor, who made a decision on each specific issue.

– Did debt purchases increase in 2020? What’s new in the agency-based debt collection?

– We see that the number of offers for debt sale has decreased slightly compared to the last year. But, in my opinion, this is a temporary phenomenon associated with the pandemic and the economic situation.

On the contrary, the number of cases transferred to work under the agency-based agreements has significantly increased. Firstly, not all financial companies were able to quickly organize remote work, so many credit organizations preferred to cooperate with professional debt recoverers more actively. Secondly, although the level of lending during the pandemic has decreased (especially in the banking sector), we are recording an increase in the level of overdue debt. Internal debt collection services of credit institutions simply cannot cope with the volume that we see now, and more often outsource debts. It is also worth to note that our debt recovery market is becoming more transparent and professional, so the trust of financial companies is growing.

– Are there many bad debts in the portfolio?

– Usually, debts with a later delay are put up for the sale, and of course there are bad debts in the portfolio. For a credit institution, the great part of debts with a later delay are already irrecoverable – work with them requires a number of debt collection measures. It’s time and money. If we take into account that banks have to keep reserves for such debts, then it is absolutely not profitable to keep them on the balances of credit organizations.

Debt collection agencies, purchasing debts with a later delay, do not bear further costs and have adjusted mechanisms of work. But always there are debts in the portfolio that cannot be recovered – sometimes their share in the portfolio can reach 30% or more. Recently, the share of these debts has increased. The economic situation is affecting on this fact – for several years in a row, real incomes of the population are declining, the level of debt is growing. And in the context of the pandemic and the prolonged economic crisis, we can hardly expect any positive changes.

– In 2020, fraud cases have become more frequent in the financial market. Has it ever happened that complaints were sent to M.B.A. Finance because someone used the company’s name to illegally collect debts, and committed illegal actions on its behalf (frequent calls, threats)?

– These facts have not been encountered in our practice frequently, but these are very unpleasant situations. Fraudsters often use the name of the company and annoy debtors with numerous phone calls with threats, visit debtors by home address. The last such case was in 2019, when allegedly representative of M.B.A. Finance came to the debtor and request to pay the debt. The situation was resolved very quickly thanks to the video made by the debtor, with the help of which it was possible to establish the fact of fraud.

In addition, we can always prove to whom we made calls, visits and in what quantity, provide recordings of conversations, because we record all the actions performed by our employees, keep records in audio and video formats.

Of course, we have an unspoken definition of “black” and “white” debt collectors, but I am more than sure that in the minds of most citizens these terms are equal.

– Debt collectors are under the serious pressure from both public and legislators. Is there any risk that debt collection agencies will cease to exist in the form in which we know them today? For example, they will become financial consultants, they will work more often with the debts of legal entities. Perhaps they will start outsourcing, providing some specific services?

– Yes, we constantly feel pressure from the public, because debt problems are always a painful issue. It seems that citizens cannot always correctly assess their financial capabilities when they take loans, they cannot always calculate the budget correctly, they do not have enough financial knowledge. And debt collectors are treated with fear – after all, we do not offer to forgive debts, but we remind about them.

Debt collection is one of the essential elements of the normal functioning of the financial system. Let’s imagine that we exclude debt collection from the chain of financial relations. And then what will happen? Debtors will stop paying, companies will suffer losses – the circulation of the money supply will be disrupted. The market will start to shrink – banks will stop lending to most of the population, they will need to reserve huge funds. And without the development of the credit system and its accessibility to a wider part of the population, the economy will cease to develop. Everything is interconnected here.

Therefore, I am confident that our industry will continue to develop, and the legislative framework will be improved. Today, debt collector is a financial consultant who does not just call and remind about the delay, but can help in solving financial issues: advise, suggest best solution what to do and how to form a budget to get out of a difficult situation. If you look at Europe, there has long been a stable model of interaction with debt collectors, and the strategies of credit institutions and other legal entities by default provide for outsourcing and sale overdue debts for debt repayment. We still have a lot of work ahead in order to change the negative perception to the profession of “debt collector”.