The Agency for Regulation and Development of the Financial Market explained how to settle debts before resorting to court.
How to resolve a debt?
Since 2021, Kazakhstan has implemented a unified procedure for pre-trial resolution of overdue debts.
First, the creditor is required to notify the borrower about the overdue payment within 10 calendar days from the date it occurs. The document must specify the amount of the debt and the potential consequences.
Second, within 30 days after the overdue payment, the borrower has the right to contact the bank or microfinance organization (MFO) to request a modification of the loan terms. The application should state the reason for the delay and possible restructuring options.
Third, the financial organization must review the application within 15 working days and propose options for debt resolution.
What restructuring options are available?
- Payment deferral.
- Extension of the loan term to reduce monthly payments.
- Reduction of the interest rate.
- Waiving part of the penalties and fines.
- Sale of collateral by the borrower.
It is important to note that starting from 2024, banks and MFOs cannot require an advance payment for considering a restructuring application.
What to do if the bank refuses?
If the creditor denies the request to amend the loan terms, the borrower can appeal to the banking ombudsman (for loans from banks) or the microfinance ombudsman (for loans from MFOs). If their decision is also unsatisfactory, a complaint can be filed with the Agency for Regulation and Development of the Financial Market.
How to avoid court and debt collection?
If the borrower does not take action to resolve the debt, the bank or MFO may:
- transfer the debt to collectors (if the overdue period does not exceed 90 days);
- take legal action, after which a private bailiff (PB) will handle the collection.
Within the framework of enforcement proceedings, the PB has the right to:
- Freeze the borrower's accounts and assets.
- Withhold up to 50% of official income.
- Restrict travel abroad.
It is essential to remember that the borrower has the right to challenge the actions of the PB if the withholdings leave them with an amount lower than two living wage amounts per month (92,456 tenge).
Additional measures for borrower protection
Starting from June 2024, new rules have been introduced in Kazakhstan:
- It is prohibited to issue new loans to borrowers with overdue payments exceeding 90 days;
- Mandatory biometric identification has been implemented for online loans;
- The bankruptcy procedure for individuals has been simplified.