On activity of ‘financial agents’ offering loan debt refinancing or co-refinancing

In order to protect the rights and legitimate interests of borrowers, the Bank of Russia gives notice of the activity of so called ‘financial agents’ offering services to refinance and/or co-finance loan debt with banks and microfinance organisations (MFO) and bearing signs of a pyramid scheme.

The Bank of Russia communicates that the aforementioned organisations mislead customers of financial services and their activity violates the citizens’ rights.

These ‘financial agents’ claim to be engaged in various investment projects which yield a return sufficient for loan repayment. When concluding an agreement they undertake to redeem the individual’s loan debt with a bank or an MFO. In return the customer pays the agent money in the amount of 20-35% of total debt. This payment is indicated in the agreement as the agent’s service fee.

Afterwards, the ‘financial agent’ makes several payments to redeem the debt in order to show that it ‘honestly’ meets its obligations and to attract new customers. Subsequently, it ceases to fulfill its obligations and its customers’ debt remains unserviced. In such cases customers can recover the ‘agent service fee’ only through legal proceedings, and considering that ‘financial agents’ do not fall under the supervision of the state authorities and are easily liquidated, the prospects of funds recovery through legal proceedings is vague.

The violation of terms of repayment of debt that should have been settled by the ‘financial agent’ on the borrower’s behalf enables the bank or the MFO to claim for early repayment of the outstanding debt.

Therefore, the Bank of Russia advises the citizens to be prudent and to refrain from entering into agreements with organisations offering loan debt refinancing or co-financing and similar services.

The reference to the Press Service is mandatory if you intend to use this material.

24.11.2014 00.00.00