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UKRAINIAN COLLECTION? YES IT EXIST!
Vitaliy Shevel is one of the main figures in the nascent Ukrainian debt collection industry. In a country that saw a free market system less than one generation ago, debt collection is becoming a necessary support structure for the Ukrainian economy. In this interview, Mr. Shevel shares his views on the present and future of the Ukrainian debt collection industry.
Steve Gan: What was the main opportunity for you to start your debt collection career?
Vitaliy: When I got my degree in law, I was very disappointed in legal practice in Ukraine. At the same time, I had the opportunity to try myself in the field of debt collection and I liked it. Then I met with the GCS and got the development opportunities that it provided to us. New markets, great opportunities, interesting work, a warm social atmosphere – what else can a young man dream of? Seriously, it’s very nice to do something new for your country, to develop a new market, to make a better business environment with your own hands. Even from the ethical side, my staff and I believe that we protect and protect good people, and punish and prosecute bad people, in a sense, fight for justice.
Steve: When you started working in this industry, what did the debt collection industry in Ukraine look like? Did the collapse of the Soviet Union affect your collection business and activities? How has it developed over the past 5 years regarding the number of agencies and laws?
Vitaliy: After the collapse of the Soviet Union, all the penalties that we had were only the so-called street penalties, money was “knocked out” in the literal sense of the word. Later, in the late 90s, the era of crime ended, and the business became more civilized. However, even when I started work in 2005, there was no debt collection in the sense that we put into this word. Several law firms offered B2B or C2C debt collection services, which at that time simply meant prosecuting the debtor. Banks were absorbed in a credit boom that had begun shortly before, and did not pay much attention to risk management and foreclosures in general. As one of my friends, a development manager at the bank, said at the time, “We must give money to everyone to occupy the market. If we don’t give it, our competitor will do it instead of us. ” It was the philosophy of the bankers of the time – so no one even thought about collecting B2C.
However, since 2006. the situation began to change rapidly. The first prototypes of collection agencies were registered. Of course, the result of the credit boom was the emergence of a portfolio of bad loans, and bankers, as well as businessmen, began to realize that this was a problem. Therefore, the first “classic” B2C collection agencies were registered. In addition, 2007 was a year of trying and searching for a better way to recover money. It was then that I began to develop the B2B collection department in a large collection company, however, I was also involved in B2C. Now I remember very well how we tried to develop the first contracts with customers from nothing, loads of business process diagrams, difficult negotiations about software, endless staff training, etc.
Further – even harder. Then came 2008. (year of crisis) and the year of small one-day agencies. Everyone liked collecting money for banks, so hundreds of small B2C collection agencies were created. The situation was so bad that the government even proposed to ban collection business in Ukraine. Thank God that this did not happen, since most of the small agencies disappeared by 2009. due to intense competition, and overall, the situation has become stable.
In August 2009, the government passed a law that made the purchase of a debt portfolio reasonable and relatively easy. The first transactions to purchase portfolios of B2C banks were recorded. Despite this, we still do not have a special law on collection agencies, and because of the weak B2B recovery market, I believe that it was a great achievement to develop a debt collection market for only 0 ~ 5 years.
Steve: In 1996, when I lived in Japan, I had the opportunity to make a presentation on debt collection to a group of businessmen from Vladivostok, Russia. They were surprised at my debt collection activities and felt that they were being too soft. In their view, threats and even physical violence against the debtor are debt collection methods often used in Russia. What do you think about it? Is the collection activity in Russia and Ukraine basically the same, or are there significant differences?
Vitaly: I can believe, Stephen, that all this was true in the entire former Soviet Union in the 90s. The usual portrait of the debt collector at that time looked like this: a guy in sportswear with a small gun or pistol. However, now the situation is completely different. Not a single collection agency in Russia, Kazakhstan or Ukraine uses threats or physical violence against debtors. Everyone tries to be completely legal, ethical and polite. I know that some agencies even try to adhere to your Fair Debt Collection Act, including its provisions in their codes of ethics!
Honestly, I must, of course, say that you can meet some rude people in black in Kazakhstan; maybe sometimes in some regions of Russia, collectors behave quite harshly; there are some not-so-honest operational officers in Ukraine, however, on the whole, collection agencies in the former CIS do not use violence, threats, or brutal or inhuman methods (of course, not to mention anything about real bandits and criminals). Our collection business has become quite civilized very quickly, over the past 5 ~ 7 years.
Steve: How do you see the credit risk management industry over the next 5 ~ 10 years, not only in Ukraine, but also in other countries that were also part of the Soviet bloc?
Vitaliy: Considering our achievements over the past 5 years, I think that over the next 5 years we will have a collection industry, very similar to the industry of one of the EU countries. Even now, some European organizations have begun to invest and penetrate the Russian market. In particular, I heard that the Swedish Lindorff and Svea, the German EOS, Intrum Justitia started some projects in Russia. IFC announced its intention to buy debt portfolios in Russia and Ukraine in 2010. Therefore, I think that very soon we will have a developed B2C collection market. I do not think that a special law on recovery will be adopted, despite the projects considered by government agencies in Russia and Ukraine; however, this is not an obstacle to the development of the collection business. I would not be so optimistic about other segments, such as B2B recovery, risk management services, such as legal expertise, credit reporting. These services are too new for our countries. Most businessmen in the former Soviet Union know almost nothing about credit and risk management. Tools such as credit reports, commercial investigations, customer identification, etc. completely not used. Providers of such services have done a lot to promote them, but progress is slow. I think that only a change in commercial mentality can cause a great development. This will not happen in a year or two. We should probably work on this over the next 3 ~ 5 years.
Steve: Tell me a little about your debt collection services. What sets your agency apart from others?
Vitaliy: In the market, 90% of players work with B2C recovery; Global Credit Solutions Ukraine is trying to be an innovative company at the peak of development. When I talk about our strategy and who we are, I like to use the term “partisan strategy” (with reference to the respected author of the term, Jack Trout). Our philosophy is to search for new areas and markets and their timely occupation, when most players fight for the height of B2C.
Today, 45% of our work is the collection of international debts. We have almost no competitors in this segment, neither in Ukraine, nor in Russia or Kazakhstan. Our usual competitors Coface, TCM, Intrum are much weaker in terms of covering the territory of the former Soviet Union, so we hold this segment. Another 26% of our turnover is made by collecting B2B. We were pioneers in Ukraine when we began to position ourselves as a B2B collection agency in 2008. We occupy most of this very young market, and, in fact, we are building the market itself, promoting the collection of B2B in a commercial environment.
Steve: Is the debt collection activity that you carry out in Ukraine one that could be banned in the United States or Europe?
Vitaly: I think so. We do not have any special law on debt collection, so this provides a wide range of available methods and techniques. I think that the usual method of contacting relatives, employers, partners and other persons related to the debtor regarding his debt would not be allowed in Europe or in the USA, despite the fact that it is not prohibited by laws in our countries. We are not obliged to terminate communications if the debtor refuses the debt, as well as if the debt is disputed. I think that the popular in Russia method of PR-support for recovering B2B (publishing information on debt to put pressure on the debtor) could cause a lot of lawsuits if such an attempt were made in the USA. We have no special obligations regarding the time and place of contact with the debtor, however, most agencies conduct business ethically and do not call or visit the debtor after 22.00.
Steve: In addition to collecting debts, what other products and services you provide, the demand for which has grown significantly over the past few years?
Vitaliy: We also provide credit reporting, but the market is not ready yet, therefore we sell less than 50 reports annually. Our several competitors sell more, but almost all of their reports are intended for foreign customers, mainly for European companies, and not for the domestic market. We also provide commercial investigations. Anti-counterfeiting investigations are constantly growing, mainly due to the general increase in the threat of counterfeiting in the world. Ukraine is also a favorable transit territory for the supply of counterfeit products to Europe. The search for assets and people, as well as the verification of these enterprises are another type of investigation, which is quite popular in Ukraine. It should also be noted that all our customers of investigations are foreign companies, domestic demand remains at a very low level.
Steve: How did online scams and other fraudulent schemes affect your agency’s services?
Vitaliy: Fraud and schemes in the form that you meet do not affect us. The reason is very simple – we are not allowed to collect funds into our accounts. Those. we are allowed to collect funds directly only to customer accounts. Therefore, our system is not susceptible to the types of fraud that US collection agencies may be exposed to. However, sometimes we encounter fraud attempts on the part of the client – when the client tries to hide the fact of receiving money from the debtor, so as not to pay us a commission.
Steve: What is the final thought or idea that you would like to complete this interview with?
Vitaliy: I would like to thank you for the opportunity to “open a window” into the market of the former Soviet Union and introduce our collection industry to Western readers. We have taken a big step in development over the past 5-10 years, and now we are actively applying the best technologies and experience of Western markets. I hope that very soon we will build a well-developed debt collection market.
www.gcs-ukraine.com