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. Last Updated: 07/27/2016

Frantic Debtors Turn to Anti-Debt Collectors

ReutersCourt marshals inspecting a car repossessed from its indebted owner at an impound lot in Krasnoyarsk last week.��
Gennady Titov, 37, a white-collar office worker, is used to surviving on bank loans and until recently made his repayments on time.

Then the economic crisis began to unfold.

With his salary hit by the crisis and banks no longer handing out easy credit, Titov defaulted on his outstanding debt of $10,900 to three banks.

Soon debt collectors started pounding on his door. When he told them that he had no money, they started to intimidate his elderly, disabled mother, who lives with him and his three children, Titov said.

In despair, Titov turned to anti-debt collectors for help.

"I had no one else to turn to," Titov, a tall, thin man with an anxious look in his eyes, said in an interview in the lobby of the office building where he works as a manager.

Anti-debt collectors -- teams of lawyers and other legal experts -- are seeing business take off as an increasing number of people default on loans amid the crisis.

Individuals owed 4 trillion rubles ($114 billion) as of October, according to the latest data posted on the Central Bank's web site. It is unclear how many of them are falling behind on payments, but presidential aide Arkady Dvorkovich warned in early March that the number of overdue mortgages alone might double this year from the current level of about 5 percent of all loans.

It's clear, though, that banks are increasingly hiring collection agencies, which in turn may practice questionable tactics to force delinquent debtors to pay.

"This problem could develop into a big social issue because it concerns almost everyone, directly or indirectly," said Alexei Lezhberov, head of Credit Consulting, an anti-debt collector agency.

Debt collectors have no legal powers that they can exercise against debtors, so they often resort to "psychological pressure" that intimidates people unfamiliar with the law, Lezhberov said in an interview at a cafe on the outskirts of Moscow, outside one of his two offices.

Widespread intimidation tactics include visits to the debtor's home and office, where collectors tell the debtor's colleagues and neighbors that the debtor is a swindler and faces prison. Another tactic is to make vague threats about violence if the debtor does not pay back the loan on time.

"Collectors bring debtors to the point where they go into hiding instead of paying," said Andrei Vlass, a legal adviser at The Only Way law firm, which provides anti-debt collector services, among others.

Titov, the officer worker, said debt collectors called his mother on their apartment phone when he wasn't at home. "I don't know what they told her because she wouldn't tell me. But she was in tears when I came home," Titov said.

Titov, a single father of three who used to hold two full-time jobs, first found himself in trouble two years ago when he fell ill with pneumonia and missed three months of work. During that time, he was fired from one of his jobs, and he came dangerously close to defaulting on a car loan that he had taken out two years earlier. So he secured three more loans.

By the time the crisis struck last fall, Titov had paid off the car loan but had outstanding loans amounting to $10,900 -- money he had borrowed to cover the car loan and living expenses since he couldn't hold two jobs after his illness.

Titov said anti-debt collectors have promised to persuade the banks to delay his payments and stop adding interest to his debt. For now, the debt collectors are leaving his mother and him alone.

Some harassed debtors have turned to the authorities for help. The Prosecutor General's Office said the number of complaints about collection agencies has grown recently and includes complaints of slander, death threats, threats of physical violence and illegal entry into homes.

Regional prosecutors have ended the "illegal activities" of several collectors, the prosecutor's office said in a statement posted on its web site in late February. It did not say whether any criminal cases had been opened or charges filed.

The Prosecutor General's Office did not reply to a written request for comment about debt collectors sent last week.

A spokeswoman for the prosecutor's office in the Penza region, which is mentioned in the statement by the Prosecutor General's Office, said local prosecutors were checking local collectors to verify the complaints.

"There are no results yet," the spokeswoman, Tatyana Ostrovskaya, said by telephone from Penza.

Asked to comment on the activities of anti-debt collectors, a spokeswoman for the Federal Court Marshals Service, Natalya Selivanova, said, "Anyone has the right to hire a lawyer, which is guaranteed by the Constitution."

Anti-debt collector agencies negotiate with both banks and debt collectors on behalf of the debtors, thereby shielding them from harassment, Lezhberov said. Also, anti-debt collectors help the debtor appeal in court if court marshals have been ordered to confiscate his property, he said.

His agency charges a standard fee of 20,000 rubles ($560) for its services, which Lezhberov said is often less than the monthly payment on the debt being negotiated.

Sergei Kobelev, director general of collection agency Vybor, said his firm did not use psychological pressure but admitted that other collection agencies did.

"We just open the debtor's eyes to where he can get the money," Kobelev said. He refused to elaborate.

Kobelev said his collectors sometimes persuade banks to write off fines for overdue debt, like anti-debt collectors do, only his collectors did not charge the client for the service.

Nikolai Ivanov, head of the USB collection agency, said he preferred "psychological influence" over psychological pressure.

"We do use psychological influence. It's hard to collect a debt without it," Ivanov said.

Asked to explain "psychological influence," he said his agency never made death threats or late night phone calls and only called relatives if the debtor was in hiding.

Ivanov scoffed at the efforts of anti-debt collectors. "If a debtor appealed to the court on his own, he would win the case just as easily," he said.

He said anti-collector agencies remained few in number but predicted that more would appear in the second half of the year "when the crisis unfolds in full force."

Lezhberov and Vlass couldn't give an approximate number of anti-debt collector agencies in Moscow but agreed that they were few.

Lezhberov's firm has been providing legal assistance to debtors for three years but opened a web site to advertise those services six months ago because of a sharp rise in the number of debtors, Lezhberov said.

Large banks were reluctant to discuss debt collection. MDM Bank refused comment, while VTB-24, Russian Standard and Rusfinans did not return requests for comment.

Metrobank spokesman Andrei Frolov said the bank hired a collection agency only after making sure that the agency used legal and ethical methods.

"When we choose a partner, we pay careful attention to the fact that the activities of a collection agency will have an impact on the bank's reputation," Frolov said.

Lyudmila Goncharova, deputy chairman of Vozrozhdeniye Bank, said the bank did not hire collectors "because we value our reputation and relations with clients."

"A bank can work with a problematic debt more ethically and effectively than a collector agency," Goncharova said.