On 6 May 2017, the President signed the Law No. 62-VI 'On Debt Collection Activities' (herein referred to as 'the Law').
The Law governs the activities of debt collection agencies, including the creation, record registration, rights and obligations of those involved in debt collection activities.
The Law introduces the following concepts:
Debt collection agency is a company, which is a commercial organisation, listed in the Register of Debt Collection Agencies.
Debt collection activities describe the activities of debt collection agencies aimed at soft collection and settlement of the debt, as well as the collection of debt-related information.
The Law does not define the concept of soft collection, nor does it specify at what point in the process one can perform the debt collection activities. However, the wording of the Law implies that soft collection includes interactions between the debt collection agency, the debtor and/or their representative, and/or a third party, bound with the creditor under the bank loan or microloan agreement, provided that all statutory rules are observed.
The Law also stipulates certain limitations on the creditor in respect to the debtor for the debt collection period. According to Article 6 paragraph 5 of the Law, the creditor is not entitled to file a lawsuit on the debt collection or to demand the remuneration accrued while the debt was being processed by the debt collection agency. Neither can the creditor claim on accrued charges (i.e. fines, penalties, etc.) over said period for the untimely repayment of the principal debt and remuneration.
Compared to the activities of the collection agency, which is performed under a pre-trial collection agreement, the enforcement proceedings are directed at the enforcement of execution of executive documents (writ of execution, court orders, court rulings on securing the claim, etc.).
Debt under a bank loan agreement or microloan agreement describes the debtor's obligations to the creditor for the repayment of the principal debt, remuneration, commission fees, charges (fines, penalties) under a bank loan agreement or microloan agreement.
Creation and activities of the debt collection agencies
The Law sets the procedure and terms for the creation of the debt collection agency, as well as the terms of record registration and activity thereof.
The actual process of debt collection occurs when a debt arises under an agreement, the subject of which is outlined in the provision of services for the creditor for soft collection and debt settlement, as well as for the collection of debt-related information (i.e. receipt of documents, clarifications and information from the creditor under concluded debt collection agreements).
The National Bank of Kazakhstan ('the NB') is designated as the competent body for debt collection activities. At the same time, the NB is authorised to maintain the state's Register of Debt Collection Agencies.
The Law for the first time determines the requirements for persons who are founders, participants and employees of debt collection agencies. For instant, the executive manager of a debt collection agency must necessarily be a citizen of Kazakhstan, have the necessary qualifications from a recognised institution of higher education, a clean legal record, etc.
Enforcement actions against the debt collection agency
Another novelty of the Law is the determining criteria and rules for interactions between the debt collection agency and debtors. In the case of violation, the debtor has the right to appeal to the competent body with a complaint about the actions (e.g. failure to act) of the debt collection agency. This can bring about the following consequences for the debt collection agency:
- A binding order from the competent body to the debt collection agency for mandatory corrective measures;
- A written warning by the competent body about the possible imposition of sanctions on the debt collection agency should repeated violations of the laws of Kazakhstan be detected in the course of one year from the warning; the violation of which would be similar to that outlined in the warning;
- A written agreement between the competent body and the debt collection agency on the need to immediately eliminate the revealed violations and approve the list of measures for the elimination of these violations;
- A demand by the competent body for the removal of the executive employee or other employees of the debt collection agency who have interacted with the debtor;
- Elimination from the state Register of Debt Collection Agencies;
- Discharge of employees who fail to comply with the rules and prohibitions pertaining to debt collection activities for a certain period.
Rules for debt collection activities
The Law regulates the basic rules for debt collection activities. For example, a debt collection agency has the right to interact with the debtor and/or their representative, and/or a third person bound with the creditor under the agreement by means of:
- telephone conversations;
- personal meetings;
- written/post notices sent to a debtor who is a physical person at their place of residence/legal address and to a debtor, who is a company, at their business address/actual address;
- text, voice and other messages via mobile communications;
- via the Internet.
Features of pre-court debt settlement. Deadlines.
The Law sets a special pre-court debt settlement procedure in case of non-compliance. In such cases, the debtor has the right to appeal actions/failure to act to the competent body.
- Within 30 calendar days from being informed by the debt collection agency, the debtor may make a written application to the debt collection agency about changing the terms of the bank loan agreement or microloan agreement;
- The debt collection agency must, within 10 calendar days from receipt of the application, forward it to the creditor;
- The creditor must, within 15 calendar days from receipt of the debtor's written application, deliberate upon the proposed terms;
- The debt collection agency must inform the debtor about the creditor's decision within 10 calendar days.
Debt collection confidentiality
Any information about the debtor, creditor, debt and third parties is confidential and may be disclosed only in cases provided for by the Law to state authorities, notaries, foreign consular institutions and persons specified in the debtor's will.
Rights and obligations
The Law determines an exhaustive list of rights and obligations for the debtor and the creditor.
The following are the peculiar features of a debt collection agency:
- Personal web-resource;
- Personal software to automate activities and record debts and interactions with the debtor;
- A branch or representative office of the debt collection agency at the place of residence or state registration of the debtor.
The Law will come into force 21 calendar days from whence it was officially published (i.e. 11 May 2017); as such, the Law was be effective as of 1 June 2017.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.