220 lawsuits filed by the Bank of Russia in respect of the pawn shops in 2016, the courts granted only half, according to the filing of arbitration cases “E-justice”. In addition, the courts eliminated by the regulator in 2016, 22 Lombard. Most lawsuits involve violations of these micro-Finance institutions, rules of reporting to the Central Bank. Submit it to the regulator pawn shops are required in 2014, but until now, market participants have plenty of complaints about the terms of these documents, and a number of collateral organizations is and continues to ignore the demands of the Bank of Russia, explain the market participants.
“Reporting for pawnshops does not take into account the peculiarities of their activities, in particular the fact that unlike other microfinance institutions they are dealing with material goods. This is a very special system of accounting and control,” says President of the “League of pawnshops” Michael Unksov. In particular, according to him, in the statements required to specify the information about the delay, and no really important information — for example, the degree of security of loans. In addition, according to him, the law on pawnshops has other specific features: for example, in the case of withdrawal of collateral by law enforcement agencies, the contract is considered canceled. But the Central Bank still considers it as a loan,” he adds.
According to Michael Unksov, contradictions between regulatory requirements and peculiarities of the activity of pawnshops often lead to the fact that your law market participants have to defend in court. According to the filing of arbitration cases this year pawnshops have filed nine actions against the regulator. “We have seen in the recent growth of regulatory risks in pawn industry. The Central Bank is trying to strengthen oversight of this area. According to my estimates, in most cases, the claims of the Central Bank to pawn shops connected with the fact that the company did not conduct collateral activities”, — said the head of the National Association of pawnshops Alexey Lazutin.
According to the law “On the Lombards”, more than one violation during the year gives the Central Bank the right to issue an order. Non-performance provisions, including the non-delivery report, or delivery of wrong statements — this is the basis for penalty imposing. “As a rule, failure to pay a fine in most cases becomes the basis for the claim of the Central Bank or the attempts of the Lombards to appeal the punishment,” said Lazutin.
“Elimination of pawnshops is conducted only in case of gross violations of the law: repeated failure to report and failure to fulfill requirements”, — said the press service of the Bank of Russia. The Central Bank said that in 2015 filed in respect of pawnshops 580 claims. As the Chairman of the National Association of pawnshops Peter Slimy, almost 100% of the court satisfies the requirements of the Central Bank. “Often the regulator applies to the court for repeated failure to submit reports and for failure to comply with regulations. As a rule, the Central Bank gives the chance to the pawnshop to improve, and then proceeds to eliminate,” he says.
How many pawnshops have been eliminated since the industry came under regulation, the Central Bank said. According to the official information of the Bank of Russia, on April 1, 2016 in Russia, there were 8290 pawnshops, whereas a year earlier there were 8594. In April 2016, Mikhail Mamut, who led at the moment the main Department of microfinance market and financial inclusion methodology of the Bank of Russia, said that from 8,3 thousand of operating pawnshops in more than half to be eliminated. He also clarified that the regulator has taken action against 4.2 thousand collateral organizations.
“About 50% of the market is dead organizations which exist only on paper” — I agree Unksov. According to him, often the owners of pawn shops who have been the order of the controller, prefer not to pay the fines, and to sell the business. “Fines for failure to submit reports are 500-700 thousand Is a fairly large amount for regional players. It is easier to get rid of the business, and then at the same place to open new pawn shop,” he says. The Chairman of the Board of the Regional League of the Lombards Lyudmila Fungus clarifies that often, the Lombards are converted to consignment shops.
Another reason why the regulator is not yet possible to rid the market of the Lombard loans from unscrupulous participants in the high demand for these services by citizens. “The business is very profitable, because to take money in a crisis, citizens simply have no place. Banks refuse to lend to customers “from the street”, and the rates in the microfinance institutions are much higher than pawn shops,” says Peter Slimy. Also, according to him, customers of pawnshops are attracted to the fact that unlike a Bank loan or loan from MFIs in case of their return will not have to deal with the collectors — even if the collateral is sold and the proceeds are lower than the loan issued, the contract with the client is terminated, it is not considered a debtor.
Central Bank data show that in 2015, the credit market of pawnshops has increased by 40% (8.4 billion rubles). According to experts, over the past two years, the market of the Lombard lending increased by 50%. “In 2014, he was at the level of 25-30 billion rubles, Now — about 40 billion rubles”, — said the Slimy. The growth of the market, in his opinion, will continue at least until 2019, when the Central Bank plans to introduce new accounting rules for pawnshops. “Market participants will have to adapt, to bear the costs of the books. Not all will survive”, — said the head of the National Association of pawnshops. Portfolio of pawnshops this year rose by 20%, calculated Lyudmila Fungus. “During the crisis, there were new borrowers. For example, we note that among the clients began to appear of mortgage borrowers who have to repay the loans in banks,” she said.