In recent years, Ukrainians have become increasingly faced with collectors who “chase up” their debts, while calling themselves the factoring company.
What is the difference between factoring and the collector and what to do in such cases?
“On Friday I met the client, who said that collectors threatened that her teenage son would not be able to enter any university, and their whole family would be kicked out on the street without clothes for non-payment of small consumer loans. From the point of view of the law it is total nonsense and deception. But such frightened people come almost every day,”- says the lawyer Anastasia Moskalenko, the partner of the Law Company “Moskalenko & Partners”.
Bank’s clients, who have no opportunity to pay their bills say, that they are contacted not by the bank or by the debt collection firm but by the, so-called, factoring.
Let us explain, that the factoring company may enter into a contract with the bank and buy the debt at a discount, and become itself a lender instead of the bank under the same conditions. Collection agency usually does not buy the debt and just gets a percentage of the collected sum of who had hired her (especially banks).
“Yes, factoring companies are easier to negotiate with, because these companies are less regulated and bureaucratic than the banks, but they also require the debtor to repay some of the debt, – says Moskalenko. – And this part is in any case not less than the amount for which they bought the loan from the bank, usually up to 25% of the amount of the mortgage loans. “
The lawyer explains that the factoring company can not become a debtor without the the bank agreement, and if receives such – it will have to pay the debt in full, instead of the borrower, so it’s clearly not profitable.
In doing so, factoring companies stress that they never work with debts without notifying the client.
“There are situations when the debt repayment occurs without the consent of the client, but in such a case the client is obligatory notified – in writing by registered mail,” – said Vitaly Volkov from “Arma Factoring”.
At the same time, he noted that factoring companies usually do not redeem one bad loan, and work with a package of bad loans of the bank. “Besides, we are talking about very large sums of money,” – said Volkov.
Therefore, if you are contacted on behalf of the factoring company about the small loan, possibly you have faced the fraudster.
Anastasia Moskalenko recommends to answer three questions:
1. What is the interest of the bank to sell your debt to a factoring company, and will it do it? If you have liquid collateral and the bank can withdraw it by itself will it unlikely assign your debt to someone else, even with a large discount?
2. What is the interest of factoring to buy your debt? Will it recover it better than a bank?
3. Is there a guarantee that the bank will really assign your debt to the factoring company? And you had already paid it a sum of money.
“The retreat rights for loans from the bank to the factoring company should occur before rather than after the conclusion of any agreements between the factoring company and the debtor. The client should not pay money in advance because there is no guarantee that he would not be simply deceived” – says the lawyer.
Another important aspect – the payment of tax on income of individuals with written off amounts: the tax liability of physical persons should not be affected by the assignment of the debt, says the lawyer.
“There are some gray schemes, which allegedly can release the debtor from personal income tax for written off amounts, but the legality of such schemes are extremely dubious. So far the only option for debtors remains the procedure of tax notices appealing, court decisions and the expectation that some of the draft laws on the abolition of this tax to the written-off loans, nevertheless will be soon adopted “- sums Anastasia Moskalenko.