Conduct supervision in microfinance market: meeting between market participants and regulator

The Bank of Russia records that microfinance organisations (MFOs) have been increasing the scale of independent arrears management operations (without outsourcing debt recovery professionals). This may be the result of the regulatory initiatives implemented in 2019, which influence the MFOs’ strategy and model of conduct. These findings were highlighted at the meeting between the regulator and MFOs’ self-regulatory organisations (SROs) and a number of MFOs accounting for a substantial share of complaints received by the Bank of Russia. The meeting was arranged by representatives of the Service for Consumer Protection and Financial Inclusion of the Bank of Russia.

The regulator recommended that microfinance market participants pay closer attention to a range of violations and unfair practices revealed in the course of conduct supervision. The Bank of Russia representatives urged MFOs to improve the quality of notification and support for consumers at all stages of transactions (agreement conclusion, loan servicing and repayment) and to take into account customer needs when offering additional services. The regulator also emphasised how important it is to carefully select counterparties when engaging debt recovery professionals and to increase MFOs’ contribution to the creation of good credit history for trustworthy borrowers. In addition, the regulator encouraged the participants to provide information to the credit history bureau. This has become especially important because beginning from 1 October 2019 MFOs should calculate borrowers’ debt load for granting loans of over 10,000 rubles.

Besides, the meeting participants learnt about the best practices in debt recovery and in rendering additional services by MFOs.

The participants were also notified that the Bank of Russia was authorised to carry out ‘test purchases’ aiming at identifying cases of misselling of financial products and services.

Closing the meeting, the regulator reminded the MFO representatives of the conduct supervision measures to be implemented in case of detection of violations and unfair practices, including cases of removal of information about MFOs from the State Register of Microfinance Organisations.