A Lifeline for Stranded Management Companies?
At first glance, ACON`s proposal appears to be a direct response to a chronic ailment plaguing Russia`s housing and utility sector. Lina Tkachenko, Chairperson of ACON, highlights a critical imbalance: managing companies (UKs) are legally bound to transfer the full cost of supplied resources to utility providers, irrespective of whether residents have paid their bills. This creates an ever-widening “cash gap,” forcing UKs to dip into their own reserves or, worse, face bankruptcy. This precarious financial tightrope act inevitably compromises the quality and volume of services delivered, even to diligent payers.
“Managing companies cannot increase their payments or index them. They receive funds only for `maintenance and repair,` while only payments to resource-supplying organizations are indexed. Increasing tariffs requires a difficult-to-organize general meeting of owners, who are reluctant to approve increases. Debts accumulate, cash gaps grow, and something must be done. This led to our proposal to lift the ban on debt sales, to increase companies` liquidity and allow factoring deals to cover cash gaps. Currently, conscientious payers are effectively subsidizing non-payers, and debts are almost impossible to recover. I see no fundamental difference between housing and utility debts and any other financial debts, which banks and other organizations are permitted to sell to collectors. Our legislators are already simplifying utility debt recovery, and I see no significant risks in our proposal.”
— Lina Tkachenko, Chairperson of ACON
For ACON, the solution is straightforward: if banks can sell defaulted loans to collectors, why should utility debts be an exception? The association forecasts that with tariff increases, this colossal debt could grow by another 15-20% by year-end. Enabling debt sales would, in their view, inject much-needed liquidity into UKs, allowing them to bridge financial shortfalls and perhaps even invest in better services.
The Echoes of the Past: A Risky Proposition?
However, the idea of unleashing collection agencies on utility defaulters elicits a strong sense of déjà vu, and not in a good way. Critics, including Denis Proskuryakov, a consumer rights lawyer from the Center for Legal Support of Muscovites, warn of significant risks, recalling the less-than-stellar reputation of collection practices from the late 1990s and early 2000s. The 2016 Federal Law No. 230 was enacted specifically to curb the excesses of collectors, setting clearer boundaries for their operations. Yet, the fear remains that in remote regions, where oversight might be lax, the “wild west” tactics could resurface.
“We well remember how collection agencies operated in the late 90s, 00s, and 10s – how they terrorized people, ambushed them, called endlessly, and so on. Federal Law 230 of 2016 now limits this arbitrariness. But it`s still necessary to prove that a collection agency is violating a debtor`s rights before a license can be revoked. Before that happens, a collection agency can `remind` many debtors about their debt, leading to quite печальным consequences for ordinary consumers. Based on this, we believe it`s impractical, especially since the existing legal procedure works quite well. Managing companies are required to have legal departments that have always collected debts and can continue to do so, especially since these cases are often handled through simplified court proceedings without the company`s direct involvement. Courts typically issue standard rulings, so the system works, and complicating it is unnecessary. Debts are always sold at a discount – 50-70%. It`s better to pursue litigation and get the full amount of the debt, along with penalties and interest, rather than selling it at a large discount to collection companies that, while more or less adhering to the law in Moscow and major regions, might engage in arbitrariness elsewhere.”
— Denis Proskuryakov, Consumer Rights Lawyer, Center for Legal Support of Muscovites
Proskuryakov highlights a practical flaw: selling debts to collectors typically involves a significant discount, often 50-70% of the original amount. He argues that existing legal avenues, such as simplified court proceedings, are not only effective but also yield the full debt amount plus penalties and interest. Why opt for a discounted recovery when a more comprehensive one is already available, albeit requiring an in-house legal team?
The Broader Picture: Unfinished Business
This isn`t the first time the issue of utility debt recovery has come under legislative scrutiny. Earlier proposals, such as allowing UKs to transfer debts directly to resource-supplying organizations or enabling out-of-court debt recovery through notaries, have been submitted to the State Duma. However, these initiatives have yet to be adopted, underscoring the complex and politically sensitive nature of the problem. The current debate reveals a fundamental tension: the financial viability of service providers versus the protection of individual citizens, especially those vulnerable to aggressive tactics.
As Russia grapples with a burgeoning utility debt, the proposed solution to involve collection agencies presents a stark choice. While it offers a potential lifeline for managing companies struggling with cash flow, it simultaneously opens a Pandora`s box of consumer protection concerns, evoking memories of past abuses. The path forward remains uncertain, balancing economic necessity with social responsibility in a sector vital to every household.
