Everything you wanted to know about loans: risks of deal and changes in the Civil code

22 January 2018

Дмитрий Шнигер.pngStarting from June 1, 2018, the portion of the loan contract will be consensual – in other words, it will be effective from the date of the agreement, not form transfer of money. This should give the borrower a new opportunity to protect their rights. A number of other changes makes the legislation more permissive and protects the weak side - the citizen. Dmitry Shniger, an associate at Khrenov & Partners, gave some practical advice on how to execute a loan agreement properly.

 How ordinary people can get a loan - what to do and to write

As for loans, then the first and most important rule – not to test people for honesty, said Dmitry Shiger from Khrenov & Partners. He advises not to give money without registration and not to provoke of the borrower to bad things, which he may not have done, had he signed the paper. Unpaid loans " on parole" often destroy kinship and friendship relations, warns the lawyer.

The best option is a contract, while an IOU slip can be a source of problems when collecting a debt. It is a unilateral document in which the borrower confirms that he has received a debt and is obliged to return. In fact it is not a contract, but  the evidence of the contract - and it is especially very weak if the money was transferred in cash, and the slip was not notarized, according to Shniger. Dmitry highlights that the borrower must indicate that the amount was given as a loan. If he doesn't do that, inadvertently or deliberately, it will not be clear from the slip what is this debt for: for example, it could be payment for any service, said Dmitry. In this case it is very difficult to have one's money back.

If funds are transferred to the bank account, Dmitry advises to specify the purpose of payment: "receipt of a loan contract such and such" and to keep a copy of the payment order. "If you do not specify the purpose of payment then it will be impossible to determine the amount transferred as a loan," warns the lawyer. He adds that the payment system is not reliable evidence of the issuance of the loan, unlike a receipt, because it comes from the lender.

Dmitry suggests to certify to notarize the contract and to issue a receipt as a separate document - it is a common procedure at notary's. Such contract and receipt in case of non-payment will make it easy to issue the executive inscription by a notary to obtain debt from a bank or through bailiffs, without judicial proceedings.

If the parties decide to do without notary, the borrower is better write all document by hand rather then put a signature under  printed text. This will give more material for handwriting examination if the borrower will declare in court that did not take or sign anything.

The whole article in Russian is here