Yesterday, Head of the Central Bank’s Financial Markets Service Sergey Shvetsov urged the government to limit loans to private individuals. “We would like to get government support in limiting financial resources redistribution without accreditation or licensing by the Central Bank”, he addressed Prime Minister Medvedev at an MIFC meeting, as quoted by Interfax.

Legal microfinance companies are listed in a state registrar kept by FMS (former FFMS). If a company is found guilty of misconduct, it is delisted and loses its legal microfinance company status. However, as Shvetsov pointed out yesterday, once it has been pushed outside the regulatory field, the company – just like any other, never listed in the FMS registrar – does not lose the opportunity to lend. This is due to Article 42 of the Civil Code, allowing any unlicensed company to lend money to people. Some of these companies’ instant payday loan ads are fly-posted en masse at bus stops and on lampposts.

Shvetsov named no concrete steps to rectify the situation last night. Experts see two possibilities. One is defining professional lenders through the Consumer Lending Act. “Preparations are underway for the second reading of the Consumer Lending Act. We could amend it to include a list of loans defined as non-professional or introduce a profit limit for non-professional loans – which is harder to control”, says NAUMIR President Mikhail Mamuta.

However, the FMS does not have a final solution, says a source, adding that Civil Code amendments seem more logical. “The Consumer Lending Act is so long in the passing that there are no guarantees that microfinance amendments will pass quickly”, says the source. “In the meantime, the Central Bank is very interested in a quick solution on half-legal non-licensed lenders”.

Legal advisors voice the same opinion. “In theory, given that the Civil Code does not stipulate a company’s loan limit, we could use the Federal law to solve the microfinance problem”, says Partner at Nalogovik Company Roman Terekhin. “The Consumer Lending Act amendments option sounds rather odd, since it could contradict Article 2 of the Civil Code, according to which profit-making is the priority of a business. Unjustified limits are blocking this”. A Central Bank source dos not rule out the possibility of the Civil Code amendments debate starting in the near future.

Ksenia Leonova

Project Group №1