No Collections Agencies in Azerbaijan?
This is one of those topics that is not so fun to write about. I don’t have any personal connection, but once you read a few details, you’ll see why it’s not so great. And, probably, also why Peace Corps Volunteers don’t much like working for for-profit businesses, like banks.
One of my most enjoyable colleagues to work with, Ruflan, has been having a rough last few days. Stressed out, tired, noticeably upset by something. Today, we talked about it. About 10 months ago, one of his clients had been killed. At the time, it was a big deal, for a few reasons. First, obviously, the guy had been killed. That’s a sad thing, all around. Second, Ruflan not only lost someone he worked closely with, but also lost a reliable client. And third, Ruflan is still required by his superiors at the bank to collect on the debt (it’s not hard to tell that this is what hurts him the most). So, you can now see why this is not a particularly enjoyable story to write.
The reason I’m writing it, though, is because of what Ruflan and I talked about today, and it’s relationship with the law in Azerbaijan. You see, in Azerbaijan, as in other countries, when someone dies, their debts get passed on to the beneficiaries of their inheritance (I know this isn’t true always and everywhere, but it’s common enough). In the case of this man, his family is now responsible for his loan from the bank. However, Azerbaijani law states that these beneficiaries are only responsible for the principal of the loan, not the interest accrued. At the time of his death, the man had paid back all of the principal and a little extra on a 2000 AZN loan. The accumulated interest, however, was 470 AZN. This 470 AZN is what’s got Ruflan down. Tomorrow, he’ll be trudging up to Lerik to talk with the family about paying that interest. He doesn’t want to, he has to go by himself, and it’s a terrible situation for everyone involved. Yet, this is a bank, and the bank’s job is to get back all the money it can from it’s borrowers. In the event that the family is willing to pay back the bank for the interest, that lets the bank and Ruflan off the hook.
Unfortunately for Ruflan, in this situation, this family knows their rights. Unfortunately, because the bank won’t stop putting the pressure on him to get the money. Not only is the bank putting pressure on him, but the family is also pressuring him. While one brother wants to pay the money back and have this finished, the other five brothers don’t want to do this at all. They already had to spend a significant amount of money making sure that the people who killed their brother went to jail. They don’t feel like they should pay any more. So, morally, Ruflan is in a tight spot because he wants to leave the grieving family alone. Professionally, the bank won’t stop hassling him until he gets the payment of the interest.
This strikes me as an interesting case just because of the similarity between the US and Azerbaijan regarding the law, requiring the payment of debts for the deceased, but the differences in the institutions we’ve set up in America to deal with a situation like this. Here, it’s Ruflan the credit officer and the family as the borrower who have to sort this out. It seems to me to be a straightforward, simple structure that leads to a very difficult path to resolution because of the incentives from both sides.
In the American system, it’s a whole lot more complicated of a structure, what with estate administrators, probate courts, and lengthy contracts stating what is supposed to happen. Even credit card debt can be transferred to the heirs. Yet, the resolution is still difficult. And the banks and creditors will hassle you to no end until a court tells them to stop it, even if you aren’t responsible for the deceased’s debts. And that doesn’t even count the seeming boundless energy exuded by collections agencies. I haven’t run across any collections agencies here in Azerbaijan. One last thing is that, often, the American loans and debts are much higher. 470 AZN (~550 USD) is not insignificant, but it’s not like they’re losing out on half of a 30-year mortgage. Yet, collecting on all the debts, small or large, is what makes a bank…a bank.