Telephone terrorism: how to protect yourself from microcredit scam and debt collection harassment

Microloans are small loans of approximately 20 thousand hryvnias. People usually take them when they need a small amount of money for a short period, usually no more than 30 days. It is quite easy to apply for a microloan. It only requires registering on the website of the microcredit financial organization (MFI) and filling in all the necessary data.

However, such simplicity and accessibility of online loans attract not only honest recipients of microloans but also scammers. Therefore, it often happens that an agreement is drawn up in your name online or you become a guarantor without your consent. As a result, collectors may call or write to you and demand to pay back a debt you have never heard about.

Why does this happen at all?

When a microcredit organization provides a loan, it usually asks a borrower to give the phone number of his relative, friend or colleague. At the same time, this financial institution does not sign any surety documents with them and may not even check whether these contacts are real. A company expects that if the loan is past-due, it can be retrieved through collectors.

Keep in mind that your phone number and home address are your confidential data. A financial company and a collector have no right to use them without the consent of the owner. Therefore, if you receive phone calls or written notices about a loan that you did not take and for which you did not act as a guarantor, firstly, this is a violation of the Law of Ukraine “On Personal Data Protection”.

Secondly, a collector who is threatening you, all the time calling to you or your family members, uses cusswords or distributes insulting photo collages, etc., violates several articles of the Constitution, Civil and Criminal Codes of Ukraine.

A collector himself has no right to collect the debt because this is the competency of the State Executive Service and of the private executors. The official procedure for debt collection is outlined in the Law of Ukraine “On Enforcement Proceedings“. Collection companies are only entitled to inform a debtor or a loan guarantor about the debt.

How to protect yourself?

If you get a call from a collector or bank and are asked to pay back a loan you did not take, proceed as follows:

1. First, check the information: has anyone really provided your contact details, while you really have nothing to do with the loan, or there is an error. For this, you should contact the bank, financial institution or collection company that you have received a call from. You can also check online whether there is a microloan issued in your name at the Ukrainian Bureau of Credit Histories.
2. If it turns out that you have been issued a microloan, file a report to the police about having been illegally issued a loan in order for such an event to be recorded, and all the necessary data entered in the Unified Register of the Pre-trial Investigations.
3. You also need to inform the bank or microfinance organization that you have not personally applied for a loan. You should explain the situation, provide your arguments and ask to stop the calls.
4. Then, ask for the certified copies of loan agreements at the bank.
5. Obtain a document from the collectors according to which you are allegedly indebted.
6. Ask a banking lawyer to find signs of forgery or try to look for them by yourself. There can be defects in stamps, false signatures, errors in the text, and so on.
7. Try to convince the bank or financial institution that the document is faked-up. If it is a bona fide institution, it will need your help to expose the scammer.
8. Report counterfeiting to regulatory organizations in the banking sector, in particular, the National Bank of Ukraine (NBU contact centre number: 0 800 505 240). In case of the non-bank microcredit sector, inform the National Commission for State Regulation of Financial Services Markets. The regulator may order an inspection and require explanations from institutions.
9. You should also apply to the Commissioner for Human Rights of the Verkhovna Rada of Ukraine or to a court. After all, they are the ones to control the observance of the legislation on personal data protection.

How does the current legislation regulate the behavior of collectors?

Commenting for VoxCheck, the National Bank of Ukraine told how often people address the NBU hotline with complaints about collectors and microfinance companies. In the first quarter of 2021, complaints against collectors accounted for 18% of the total number of written appeals and 13% of all calls to the NBU contact center. Appeals about the work of financial institutions engaged in microfinancing accounted for 80% of all complaints. According to the NBU, most of the complaints were related to the harsh methods of debt collection that were used by banks and microfinance companies. This problem has been one of the main ones over the past year and still remains relevant.

To find out more about the dangers of microloans and online loans watch our video. 

According to the National Bank, with the adoption of the law on consumer protection in Ukraine in March this year, for the first time, there was a clear regulation of not only collection companies but also lenders.

First, the legislation has finally designated a regulator and supervisor, which is the National Bank of Ukraine. The NBU will set additional requirements for interaction with consumers, consider citizens’ appeals, and protect their rights in case of violations.

Second, only companies that have been inspected and registered in a special Register of the National Bank will be able to operate in the market.

Third, for the first time in Ukraine, there are requirements for ethical behavior when interacting with the consumer. The law establishes an exclusive list of ways in which the collector should communicate with the consumer of financial services. Collectors are allowed to call, send text, voice and other messages only at a certain time, from 9 am to 7 pm.

According to the law, collectors are not allowed to call at night or during the day, to mislead about the consequences of non-fulfilment of obligations, to threaten, to blackmail, to demand from relatives to take on obligations. The law also prohibits the collection and processing of personal information about a person’s work schedule, places of rest, information from social media, personal photos, etc. If these requirements are violated, the law provides for liability: from fines to exclusion from the Register of collection agencies (and therefore the company would lose the right to engage in such activities).

Fourth, lenders themselves must also monitor their collectors’ behavior and their compliance with ethical requirements. If a collector violates these requirements at least twice during the year, a lender must terminate the contract with them and notify the National Bank.

Besides, banks and financial companies will be required to inform a consumer about the possible consequences of obligations non-fulfillment before signing a contract with them. In particular, to inform a consumer about the right to get a collector to take part in the case. Financial institutions must indicate this information in the consumer loan agreement and in the consumer loan passport. The lender must publish information about the collection company on its website and in the places of services provision.