Support in moderation: debtors in regions with martial law will be given a reprieve on loans

Russians who owe money to banks from border regions will be able to receive a delay in debt collection. Such a bill was approved by the Commission on Legislative Activity, a government source told Izvestia. The relief will affect the property of debtors in regions with martial law or a regime of counter-terrorism operations (it operates in the Belgorod, Bryansk and Kursk regions). The case itself will not be closed, but the person will not be able to seize accounts, withhold the amount from the salary or seize property. For how long residents of these regions will be able to receive a postponement, see the Izvestia article.

How to get a deferral in debt collection

Residents of a number of regions of the Russian Federation will be given a reprieve on their debts. Bailiffs will be able to temporarily suspend the recovery of property (if a person does not pay loans for a long time) in the regions of Russia where martial law or the regime of the counter-terrorism operation (CTO) is in effect. The government has approved such a bill, a source in the Cabinet of Ministers told Izvestia. The initiative has also successfully passed the Commission on Legislative Activity (KDD).

Photo: IZVESTIA/Pavel Volkov

—Approval by the Russian government gives the bill an official status and increases the chances of its adoption by the State Duma," explained Vladimir Chernov, analyst at Freedom Finance Global.

It is proposed to add a new reason for which a bailiff may suspend enforcement proceedings (that is, the procedure for collecting debts through the seizure of accounts and property), according to a draft resolution of the Cabinet of Ministers. But the postponement will be valid for the duration of the CTO regime or martial law.

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At the same time, it is important that this does not violate the rights of other people. Therefore, the postponement will not apply to:

• alimony payments,

• payments for damage to health or life (including in case of death of the breadwinner),

• debts related to corruption crimes.

Thus, the bill protects debtors in extreme conditions, but at the same time retains mandatory payments in the most sensitive cases.

Photo: RIA Novosti/Sergey Bobylev

This is especially important for participants in a special military operation (SVO): many of them are on duty or directly in a combat zone and simply cannot manage their finances and debt payments, analyst Vladimir Chernov noted. The bill gives them additional protection — their property will not be able to be taken away at a time when they are physically unable to defend their rights.

Martial law is currently in effect in the Donetsk and Lugansk People's Republics, as well as in the Kherson and Zaporizhia regions. The CTO regime has been introduced in the border regions of Bryansk, Kursk and Belgorod regions.

The initiative is supported by the National Association of Professional Collection Agencies (NAPCA), the press service of the organization reported. Izvestia contacted the Central Bank and the Federal Bailiff Service (FSSP) with questions about how they evaluate this proposal.

Why give Russians a reprieve on loans

Residents of regions where martial law has been imposed are often simply unable to pay their loans or loans on time, the press service of the NAPCA explained. The reasons are very different: banks are closed, communication is intermittent, and it is sometimes impossible to transfer money. But there is also a human factor — in the conditions of military operations, people, to put it mildly, are not up to paying off debts. Therefore, the main task of the business here is to support such borrowers as much as possible and not to aggravate their situation.

Photo: IZVESTIA

— The destruction of infrastructure, loss of jobs and evacuation make regular payments impossible. The postponement gives them time to survive the period of force majeure without losing property and avoids social tension," said Vladimir Chernov from Freedom Finance Global.

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In the border areas where the CTO regime has now been introduced, agriculture and small businesses are particularly developed — after the outbreak of hostilities, work in these sectors quickly stops, added economist Andrei Barkhota. The incomes that people and companies had to pay off their debts from are disappearing. Therefore, it takes time for them to regain their ability to pay.

— The main nuance is that we are talking about postponement, not release from obligations, — warned Vladimir Chernov.

The debt remains, and the collection process is suspended only temporarily, the expert explained. For the borrower, this means the opportunity to save housing, car and other property in conditions where it is impossible to service the debt.

Photo: TASS/Semyon Likhodeev

The mechanism is similar to credit holidays — when loan payments are temporarily suspended so that a person can get a break, Andrei Barkhota said. However, a postponement for the duration of martial law or the CTO regime may be longer and more extensive than a regular vacation.

Nevertheless, borrowers from these regions often fail to get out of the financial hole — their support can only postpone the problem, the economist noted. After a break or credit holidays, the bank goes on restructuring (extending the term and reducing the monthly payment). If the situation worsens, bankruptcy ensues.

Anyway, if the innovation is adopted, the work of bailiffs in debt collection will be severely limited in regions with military or martial law. According to experts, the situation may lead to the accumulation of "deferred debts" that will simultaneously return to work after the cancellation of the special regime. Banks and collectors will have to take this into account when assessing credit risks, which may affect the terms of their products.