To protect consumers and restrict access of bad faith companies to the Ukrainian market, the Ukrainian government enacted the Debt Collectors Law on 14 April 2021, which regulates the legal status of debt collecting companies, provides detailed rules for engaging these companies for settlement of overdue debts, introduces mandatory rules of conduct and prescribes liability for the violation of the Law. Most of the provisions of this law will come into force three months after its passage.
The Debt Collectors Law was passed to establish a legal framework for regulating the relations arising out of settlement of overdue debts (i.e., the measures taken by lenders and debt collecting companies aimed at out-of-court repayment of overdue monetary obligations by consumers).
Under the Debt Collectors Law, the debt collecting company is a legal person registered in the respective register (which shall be established in next three months), and entitled to settle overdue debts in the interests of a lender.
The National Bank of Ukraine is responsible for the state regulation and supervision of consumer lending and settlement of overdue debts in Ukraine.
A detailed procedure for assigning rights under a consumer loan agreement is prescribed.
A lender may involve a debt collecting company in settling an overdue debt under the consumer loan agreement only if this agreement's terms entitle the lender to do so. In addition, the lender must notify the National Bank of Ukraine if it enters into an agreement with a debt collecting company.
Breach of the Debt Collectors Law will lead to liability as specified in the law. Liabilities include temporary suspension or termination depending on the type of violation, or fines of up to UAH 136,000 (EUR 4,100) if lenders breach their collection duties.
For more information on the Debt Collectors Law, contact your CMS partner or local CMS experts.
Legislation:
Law “On Amendments to Certain Laws of Ukraine Concerning Consumer Protection in Settlement of Overdue Debts” No. 1349-IX dated 19 March 2021 (in Ukrainian).
