Non-profit private firms engaged in the issuance of relatively small sums of money at very high interest rates in Russia were called microfinance organizations. In our country, they (on legal status) arose after the disappearance of the Soviet Union. When there is no one to borrow, there is no way out, except for some microfinance company. Practice at 25 showed that the most frequently asked question among clients of such organizations is the following: what will happen if you do not pay any microloans? In terms of what it threatens. Why immediately on such a pessimistic note? We need to start with a study of the legal framework that ensures the legal existence of microcredit firms. Such a base is provided by the Federal Law “On Microfinance Activities” under the number 151 of 07/02/2010. Without going into legal chicanery, one can say that microfinance organizations (abbreviated MFIs) regarding the conditions for issuing money to the public are limited only by the size of the loan (1 million rubles).
Features of the MFI
The law specifies all other subtleties of such a financial transaction very briefly, but very succinctly. Namely, that a small loan is issued on the terms specified in the contract between the borrower and the beneficiary. That is, the client took the money from a non-profit organization, but he will have to repay the debt only in the way the lender wishes. Without exaggeration. In other words, microcrediting does not fall under the general rules governing the issuance of debt at interest on funds to legal entities and individuals. By the way, even the word “microcredit” is used, but such a loan is not officially considered a loan, and the organizations themselves are neither banks, nor stock exchanges, nor brokerage houses. Their legal status is very vague and lies somewhere between small businesses and private credit enterprises. From all these facts a number of consequences follow:
- Such organizations practically do not check the client’s solvency or do not check it at all. Since they do not bear any responsibility for the fact that they issued a loan, for example, to an unemployed client. When applying to such firms in your pocket, you need to have only a passport of the Russian Federation and nothing more – not a certificate of income in the form 2-NDFL, nor a workbook, or an TIN. Information about whether the client will be able to pay the microloan is limited to the “place of work” column in the application form (and many, in order to receive money, write inadequate information about the work).
- The most important point is that microfinance firms are free to assign literally arbitrarily high interest rates. And here a simple trick is used, acting on those who absolutely do not understand anything either in mathematics or in the basics of the economy (that is, on many) – percentages are always written and voiced by day, not for a year, which creates the illusion of tolerance and relative acceptability of conditions.
- There are no clear regulations on penalties. Each organization wishing to return its money from a client who chose (or forced) not to give it back, assigns the type and size of the collection at its own discretion. Very rarely, firms engaged in minimal lending file a lawsuit to the appropriate authorities. As a rule, the proceedings are held in private.
- There are no clear loan repayment terms. It often happens that customers can keep the “body” of a loan unpaid, making payments only on interest. As well as firms can delay the repayment of debt by any means, up to spontaneous moves, given that such organizations almost always do not have their own buildings, and they use office space in shopping centers.
- It can be summed up that the main principle in the activities of microfinance institutions is based on non-transparency. The closed type of economic activity prevails, in which financial transactions are regulated unilaterally.
- And so you can designate another consequence. The fact is that the clientele of microfinance institutions is 99% individuals. That is, people involved in wage labor for a salary. The rarest of cases is when a legal entity or an individual entrepreneur decides to use a loan from an MFI. On a loan, to pay interest of this size with five-digit amounts (and, as a rule, legal entities, as a rule, need that much) – this is catastrophically unprofitable. Businesses can go bankrupt altogether by repaying the debts of a microfinance company.
A practical example of a small “loan”
Although the maximum number of a loan is declared in the amount of one million rubles, but according to statistics people most often tend to take no more than 15 thousand rubles. Let’s get a look. For the average MFI, the standard is the condition: 1% per day of the amount issued. This is still very soft. Many organizations offer loans at 2% and 3% per day. But it is worth counting an overpayment of at least one percent. Suppose a client takes 1,000 rubles at 1%. Suppose a contract was signed with the firm that the client is obliged to pay the entire debt in exactly 30 days. From 1 000 rubles one percent is 10 rubles. Consequently, on the day of the return the client is obliged to deposit 1,300 rubles to the office. It will seem to the average person that this is not so much. Well, who can argue that the loan service, stretched for a whole month, the lender does not have the right to throw himself a couple of hundred.
But the man in the street in this situation operates with the estimate that you can buy for 1,000 rubles and 1,300 rubles. The difference is really not so great. But for an objective assessment it is necessary to operate with mathematical relations. And by the ratios, it turns out that on top of the principal debt a person will contribute an amount that is almost a third of the original amount (1,000 rubles). Which is really very, very much. And if suddenly the client will be able to pay only interest, and will it be possible to fully repay the loan only in another month? Then the total amount that a person will be forced to pay to the office will be 1,600 rubles already! And if under the same 1% the client takes 10 thousand rubles? Such money, as a rule, is taken not for one month, but for three months at a minimum.
We count: one percent from 10 thousand rubles. – this is 100 rubles. And 90 days multiplied by 100 rubles is equal to 9,000 rubles. That is, after 3 months, the client will have to pay as much as 19 thousand rubles for the borrowed 10 thousand. There is hardly anyone who can argue that overpayment is simply prohibitive. Those who gave the debt felt it in their own skin. But the calculation was carried out only with the condition of one percent of the amount. On many online services, reviews of MFI borrowers are full of messages that it’s impossible to pay such interest.
The causes of huge interest
It is not surprising that MFIs are not eager to report annual interest to borrowers, because several hundred percent a year is obtained. This situation is explained by several reasons:
- Small financial firms, unlike banks, do not have access to cheap money, working with relatively small amounts. So, the profit can be obtained by lifting up the interest rate.
- Most MFIs are “short-lived”, as there are a huge number of such market actors. Due to the pressure of competition and the general underdevelopment of Russian small businesses, the vast majority of MFIs do not live longer than 1-2 years. And the owners of these firms, which also need to pay the loans taken on the business and pay the rent, are more likely to grab the largest possible piece from their company.
- Such “dwarf banks” are often used by people with a bad credit history who were denied by normal banks. That is, these people are a priori practically insolvent. The offices understand this perfectly. Therefore, with such huge overpayments, “the casino remains in the win” always. Even if only one of the three really pays the borrower.
Options for action borrowers
But how not to pay a microloan? Can I not pay at all? Or is it better to simply not give interest? What to do first? These questions return us to the beginning of the article. MFIs can sue the debtor, but they are not in a hurry. The fact is that because of the aforementioned vague legal base of such offices, the 179th article of the Civil Code of the Russian Federation (clause number 3) often works for the borrower. It says that if one side made the other side agree to a bonded agreement, taking advantage of its difficult financial situation, this agreement will be canceled. And the initiator of the transaction also has to bear administrative responsibility. The conditions are really enslaving, and in any financial forum, people say that MFIs, so to speak, are not included in the “league of big players”. Therefore, if the courts take the side of banks in 9 cases out of 10, the courts take the side of the MFIs in 1 case out of 10.
Some borrowers calmly say: “I do not cry and do not cry.” Others, on the contrary, have to cry because of the criminal actions of the collectors. Still others say: “I’m paying a microloan for the last time.” Immediately it should be said that throwing a firm at 100% will not work. If only because the money was still received, and nothing to return is not a ride. And even a favorable court decision involves the return of the principal amount of the debt with small percentages (usually, following the Central Bank template – 8.25% per annum). But taking an enslaving microloan, you should not despair at all. One of the ways to legally not pay a microloan is refinancing. That is, the office will issue a new fast loan, but at much milder conditions. The client must spend the received money on the liquidation of the old debt. To implement refinancing, you need to visit the office of the organization, having several documents with you:
- passport of a citizen of the Russian Federation;
- second identity document (driver’s license, military ID, etc.);
- application for a refinancing request;
- insurance certificate of compulsory pension insurance;
- a document confirming the reason for the impossibility to continue extinguishing the debt that has been paid in good faith up to this point (for example, a note from the employer in the employment record book about reductions).
In fact, any MFI is obliged to meet the client’s needs, given the initially unfavorable conditions for the latter. Especially if the borrower has collected all the necessary documents and does everything to resolve the issue. If the client says: “I can’t take it anymore,” and the office responds, “I must be able to,” you can safely sue. With all the papers that were able to collect. The court will consider the debt returned to the present moment. Who, and mikrokreditnoe institution is obliged to make concessions. Given that the slightest delay is the following sanctions:
- an increase in the already exorbitant interest rate;
- accrual of interest (penalty interest);
- charge the total amount of the loan.
For example, such a combination. In case of non-payment of interest on time – a fine of 1 000 rubles, plus an additional 2% in excess of the amount due each subsequent day of delay. And do not forget that some MFIs are semi-criminal structures, cooperate with collectors, apply illegal pressure methods. Endless calls and text messages at any time of the day is a common thing. But the inscriptions on the front door of the apartment or the punctured wheels of a single car are already serious. You should always remember that any penalties can be implemented only by official civil servants by a court decision in a civilized manner. Any other actions of a hooligan, psychological, or criminal nature are grounds for immediate appeal to the police. Since MFIs today are several times larger than banks, and the financial situation of the population has not improved, the information in this article is more than relevant.