At this point, I should be numb to Russian horror stories. But several days ago, the following story struck a chord, not just for its violence and predatory nature, but because it speaks to the spectre of the 1990s — a period many Russian citizens associate with state and societal collapse, widespread criminality and economic insolvency — which is currently haunting Russia.
On 5 April, in the town of Iskitim in Novosibirsk oblast, four masked debt collectors broke into the home of Natalia Gorbunova, beat her husband and 17-year-old son, and then raped her in front of them. Gorbunova had taken a 5,000 rouble ($75) microloan from two companies, Money Now and Money Quickly, in 2014. She couldn’t make the payments.
But how could she? According to them, Gorbunova now owned them 240,000 roubles ($3,586). The beating and rape weren’t the loan sharks’ first resort. They’d been threatening her family on the phone for two years. A week before the collectors raided Gorbunova’s home, they tried to assault her son, but he managed to get away. The identity of the assailants is still unknown. The cops are scrambling to find them.
Many in the foreign press have noted that revelations of Vladimir Putin’s connections to the Panama Papers weren’t reported in Russia’s federal media. But the reality is that for most Russians who are struggling to stave off constant harassment, threats, and outright violence from predatory lenders, Putin’s alleged two billion dollars matters far less in their immediate daily life. It’s a reminder of the old Russian adage that “God is high above and the Tsar is far away.”
Jolted into action
Nevertheless, federal media did report the crime against Gorbunova and her family. National broadcaster NTV even has a topic page devoted to debt collector violence. Indeed, there is growing public concern — in 2015, the amount of outstanding personal debt rose by 25% to 870 billion roubles ($13 billion).
Collector violence is even getting the attention of the Tsar and his minions. For example, Investigative Committee head Aleksandr Bastrikin has taken the Gorbunova case under his personal control.
The current outcry is too late for many victims of collector terror. Media reports of harassment and violence against debtors have become all too common
Russia’s usually lackadaisical politicians have also been jolted into some action. Several have spoken out about the need to reign in debt collectors, and in Kemerovo oblast, Governor Aman Tuleev and his regional legislature banned collectors outright. (Collection agencies quickly denounced the move as “populism” and the Justice Ministry said that the law was a blow to “economic freedom”.) The Duma has passed the first reading of a bill that restricts debt collectors’ activities and their interactions with debtors, prohibits harassment, threats and violence, and raises fines by ten times to two million rubles.
A week ago, even Putin spoke out and demanded an end to the lawlessness, threats, and psychological and physical abuse by “quasi-collectors”.
February 2016: Foreign currency mortgage holders picket a Moscow branch of Raiffaizenbank. (c) Vladimir Pesnya / VisualRIAN. All rights reserved.“The main purpose of this law is to protect debtors from collectors, but it will only relieve the symptoms, not cure the disease,” Pavel Medvedev, a financial ombudsman, told RBK. Indeed, in many respects, the current outcry is too late for many victims of collector terror. Media reports of harassment and violence against debtors have become all too common. Most debtors and their relatives are subject to constant harassment —in Stavropol, debt collectors shut down a hospital’s phone system with their constant harassment of a hospital worker over the telephone. Similar incidents have happened in other towns as well.
Threats and outright violence are increasingly frequent. In January, debt collectors in Ulyanovsk threw a Molotov cocktail through the window of a 56-year-old grandfather, severely burning his two-year-old grandson. The grandfather took a 4,000 rouble ($60) loan to buy medicine; the collectors demanded he pay them 40,000 ($598).
In Krasnodar, a debt collector broke a woman’s finger over a 300 rouble ($4.50) debt payment. In Penza, a 54-year-old woman took a microloan for 30,000 rubles ($448) to, once again, buy medicine. She put her home down as collateral. The collectors now say she owes 470,000 rubles ($7,022), and as a result, they’re to seize her home. In Rostov-on-Don a collector was sentenced to ten months in prison for threatening to blow up a kindergarten if an employee didn’t repay his loan.
In Yekaterinburg, collectors “cut the telephone wires and filled the locks with glue” as they locked a debtor’s child in an apartment. Aleksei Selivanov, a Yekaterinburg lawyer who defends debtors against predatory lenders, was threatened by a group of collectors led by Maksim Patrakov, a former Donbas volunteer fighter. According to the jurist, Patrakov threatened to throw him in a car trunk and murder him out in the forest. The media is filled with these stories.
“God is high above and the Tsar is far away”
The total amount of general individual debt in Russia is about 8.6 trillion roubles ($128.5 billion), and roughly 59% of adults in employment are in debt. But this percentage varies by region. The highest is in Altai Republic — here, 91% of the employed population is in debt. In Kemerovo in Siberia where collection agencies were recently banned, 74% of the employed population is in debt.
The average debt per person in Russia today is 210,000 rubles ($3,138) and credit payments equal an average of 30% of a Russian’s monthly income. In some regions like Karachaevo-Cherkessia, the debt payment to income ratio is 75%. Around 16.9% of debts are delinquent on their payments, and 12.7% of them are late for more than 90 days.
Many people are increasingly turning to “informal credit” — often high interest microloans or payday loans — especially as formal bank loans are harder to get. Microloan companies are capitalising as a result
Mortgages and car loans make up the majority of this debt, but many people are increasingly turning to “informal credit” — often high interest microloans or payday loans — especially as formal bank loans are harder to get. Microloan companies are capitalising as a result. The Russian microloan industry has seen steady growth over the last few years. It grew by 14% in 2015, and experts project it to increase at least another 12%, or by 73 billion rubles ($10.9 billion) in 2016.
As some of the stories above note, many Russians are taking microloans to cover health costs. This is directly tied to Putin’s neoliberal reforms to “optimise” healthcare. The Financial Times recently noted that in 2000, 75% of Russians’ health costs were out of pocket. It reached 92% in 2014. A few of the regions with the highest debt payment to income ratios are also the ones with the highest poverty rates. Supporting the Russian rouble. Borovaya Street, St. Petersburg, February 2016. Photo (c): Igor Russak / VisualRIAN. All rights reserved.This comes at a time when 76 of Russia’s 83 regions have budget deficits, 56 have debts over 50% of revenue, and several are cutting spending on culture, education, and healthcare. Russia’s economists are not satisfied and argue that there are still “possibilities for optimisation,” Russia’s own euphemism for austerity.
For many Russians, the rapaciousness of debt collectors and the ineffectiveness of the federal government and local police to do anything about them conjures reminders of the 1990s. As a recent article in Nezamisimaya gazeta put it:
But [the government’s] attempts to pin the guilt or to shift the blame on others does not solve the problem. This is obvious in the example of debt collectors: the federal government’s inaction and just plain dawdling in solving pressing social problems comes with the fact that the power vertical built in Russia is beginning to fall apart. This situation is reminiscent of the late 1990's, when after the Federal default, regional authorities began to enact "measures of economic self-defense."
This connection between a return to the 1990s and debt collectors is hitting home. In his call for outlawing debt collectors, Sergei Aksenov, the head of Crimea, specifically referenced the “lawlessness” of the 1990s. “It’s necessary to completely prevent debt collectors from collecting debts. The government must do this. And, of course, in dealing with the problem of debt we must not return to the lawlessness of the 1990s.”
Vyacheslav Kurilin, the leader of Stop! Debt Collector, told Gazeta.ru: “Microfinance organizations were created by criminals, and their ways of collecting payments are very harsh. They themselves say: we ran racketeering in the 1990s, but now that it’s legal, we’re called debt collectors.” Anton Tsvetkov, a member of Russia’s Public Chamber, said that debt collectors use methods that “remind many of the 1990s.” It’s no wonder Putin used the common 1990s word for “lawlessness” (bespredel) in his comments on debt collectors. It’s likely it resonated with many Russians.
And therein lies the problem. Putin’s long tenure has been predicated on the elimination of that very lawlessness. But now as Russia is in the throws of economic crisis, and more and more people are turning to microloans to survive, the situation is ripe for predation. The outcry after the horrible crime against Gorbunova is telling. And the federal centre’s lack of response to the economic situation is compelling regional leaders to take action themselves.
Citizens, particularly in the provinces, are pushing back too. Social media pages like Stop Collector provide a space where hundreds of people share experiences, give advice, and discuss the problem of debt and debt collectors. There’s also the project Russia Without Debt, which aggregates news about debt and tries to educate debtors about their rights. The social organisation Sovetnik in Chelyabinsk is dedicated to protecting the rights of debtors. In Pskov, residents staged a small protest against collectors and payday loan outfits.
And some are directing their anger over the existence of collectors to Putin himself. On the site where people can submit questions for Putin’s annual “Direct Line” telethon, one of the most popular ones says: “Who made and for what reason are the activities of collection agencies legal? They’re complete gangsters! How else to call them? They threaten, beat, and set [people] on fire. I want to say that thanks to these collectors’ behavior not only are debtors themselves afraid, but so are people who have absolutely nothing to do with these debtors.”
Correction, 20 May: Russia's Interior Ministry reported on 19 May that investigators had established that the individuals involved in the attack on Natalia Gorbunova's family in Iskitim, Novosibirsk posed as debt collectors as part of another scheme.