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Law On Consumer Lending Confirmed the Status of Recovery Agencies and Their Right to Recover Debt

On December 13, the State Duma passed the Law On Consumer Lending in the third reading. It a very important and desirable document for the whole recovery industry.

During this year within the framework of the National Association of Professional Collection Agencies, in conjunction with industry-specific ministries and the banking community, NRS was working actively on the text of the draft law, regulating the rights of lenders and their lawful representatives, recovery agencies.

Article 15 of the passed law stipulates an option of transferring debt by creditor to a third party, and it also indicates the means of interaction with debtors during debt recovery. The law allows recovery agencies to hold personal meetings, phone talks, send mail, text, voice and other messages transmitted via electronic channels, including mobile connection.

Other means of interaction with a borrower may be used only if there is written consent of the borrower or a party which provided security under the consumer loan agreement.

Limitations in recovery agencies' activities apply in respect of interaction with a debtor on business days in the period from 10 p.m. to 8 a.m., and from 8 p.m. to 9. a.m. at the weekend, on non-business days and public holidays on local time according to a place of residence of the borrower or a security provider under the consumer loan agreement.

Article 12 of the Law provides for the assignment of claims under consumer loan agreements. Hence, the passed law drew a line in long-lasting discussions and debates on legitimacy of selling bank debt to debt recovery agencies.

The above-mentioned adopted provisions of articles on a legislative level confirm the recovery agencies' status as full-fledged participants in the financial market, which is especially important during economic downturns in the country and worsening of the borrowers' financial discipline.

Another nonetheless significant change in the passed law is charging the Bank of Russia with obligations to monitor compliance with requirements of the law. The choice of the Central Bank of the Russian Federation as an agency regulating recovery agencies' activities is, in our opinion, logical and efficient. The regulating role of the Central Bank will be instrumental in decreasing the number of unscrupulous participants in the debt recovery market and will raise the profile in dialog between lenders and professional recovery agencies.

The law will become effective since July 1, 2014 after approval by the Federation Council and signing by the RF President.