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08 february 2024, 14:43
The Financial Ombudsman Service (hereinafter, the FOS) during the FOS Public Council meeting on the 8th of February presented the principles of complex settlement of debt of a borrower-individual to financial institutions with the assistance of the Financial Ombudsman.
It should be reminded that Russian President Putin instructed the Government to work together with the Bank of Russia and establish a single mandatory procedure for out-of-court dispute resolution between professional lenders and citizens in connection with credit and loan debts. The deadline is 1 May 2024. It is assumed that the settlement procedure will become the FOS competence.
“Today, the total indebtedness of citizens exceeds 30 trillion rubles, which in itself is not bad for the economy. But high indebtedness also poses certain risks for the citizens themselves. On average, there are 1.8 loans per person in the country, the number of citizens with loans has approached 50 million people, more than 11 million borrowers have three or more loans. The most problematic situation here for both the lender and the borrower is created when there is a default,” Financial Ombudsman Viktor Klimov said at the meeting, presenting the approaches proposed by the Service.
According to Viktor Klimov, despite the fact that the consumer is a debtor, it is important to realize that he or she is still the weaker party. “Due to a hard time of life, he or she needs a competent assistant when it comes to multiple creditors in particular,” the Financial Ombudsman added. He said it is important that the mediator should not only be able to bring the parties to a consensus, but also ensure that the creditors honour all agreements.
“For that procedure to be effective, it requires a number of actions that cannot be done in private, by any independent institution among financial market participants,” he went on to say. “In particular, it requires obtaining data on the consumer from various agencies, information about their debts, and it is necessary to comply with the requirements of legislation on personal data, to comply with the protection of banking and commercial secrets, and so on. In addition, the financial conciliator’s system of operation must have some levers to counteract unfair practices on the part of financial institutions, as well as fraud by the so-called “de-debtors”. Thus, the platform on which all this is supposed to take place should obviously be both public and independent,” Viktor Klimov observed.
According to Viktor Klimov, the key subject of agreements following the financial conciliator’s efforts should be bringing the borrower’s current debt load in line with his or her means and solvency through various options that the lender can provide – instalments, restructuring, credit holidays, and the like. This is the essence of the comprehensiveness of the procedure. “At the same time, it is important that the financial conciliator should have the right to verify the legality of the claims and conditions that are proposed,” he emphasized.
The agreement format will be debated as part of the drafting of the relevant legislation. It may be an agreement with signs of mediation between the borrower and the lender, or it may be a technical record, or any other document.
It is also proposed to introduce a moratorium on debt collection, on new consumer loans, on out-of-court bankruptcy for the period of mediation.
If the borrower fails to fulfil the agreed terms, the creditor will have the right to apply to the financial conciliator for an analogue of an enforcement order – a certificate. As part of the consideration of such an appeal, the financial conciliator will verify the factual accuracy.
“As a result of the creation of such an institution, the borrower gets on his side a competent independent public assistant – arbitrator – in this interaction with creditors, and verification of legality at all stages of settlement. The lender gets an opportunity to agree on a public platform, an opportunity to control, in a certain sense, compliance with these agreements, guarantees of commercial secrecy and, in general, the stimulation of fair competition,” the Financial Ombudsman added.
