Federal law regulating debt collection is coming into force

In our article as of 25.04.2016 “New Debt Collection Regulations Introduced in Russia” we particularized the history of the bill. Over the past period the law has been passed and endorsed by the President of the RF on July 3, 2016. The Federal law №230-FL "About protection of the rights and legitimate interests of physical persons when implementing activities for return of the overdue debt and about introduction of amendments to the Federal law "About Microfinancial Activities and the Microfinancial Organizations" will come into force since January 1, 2017.

The law fixes legal basis for return on the overdue debt of physical persons. The fundamental proposition of the law is debt collection being the main activity type of the organization.

Use of physical force or threat of it, personal or property injury, bullying and circumvention are forbidden by law. Collector is entitled to communicate with the debtor maximum twice a week on the phone and meet in person once a week. Moreover, communication with the debtor at night is forbidden. Collectors have no right to hide using phone numbers and e-mails.

Debt collection will be controlled by the Federal bailiffs service, which is endowed with powers to keep the Register of legal entities engaged in collection of overdue debts. According to the law, debt collection without registration in the register is forbidden.

So, activities for forced and unforced collection of debt will be divided between subdivisions of this federal department and debt collection agencies.

In the publication mentioned above we noticed that tough law requirements to legal entities can reverse debt collection market of Russia.

According to the Information and analytical system Globas-i^®, the number of companies containing “collection agency” in their names reduces from 890 as of April 2016 to 414 as of December.

Only 66 companies have registered main activity type directly related to debt collection (OKVED2 82.91) “Activities of collection agencies and credit bureaus”. 79% of them are registered as Limited Liability Company and 21% are individual entrepreneurs. These companies are located in 28 regions of Russia (see Picture 1).