Living to pay off another man’s debt

Russian banks are losing up to $US 4 billion in bad debt partly due to fraud and identity theft. More and more consumers are using credit cards to make the purchase of big ticket items that much easier. However, along with the convenience comes the risk of falling prey to criminals.

Banks all over the world issue personal loans amounting to $US 1.5 trillion annually.

While Russia may not be among the largest lenders, $US 600 per head versus $US 27,000 in EU countries, more and more goods are being purchased on credit here. One in seven Russians have bought furniture, a washing machine or a car on credit. But as more people use credit the more active the swindlers become.

Criminals have different schemes to trick the credit system. Here are some of the most widely used:

Marianna Legoshina was a victim of one of the most common and fastest-growing credit frauds. After her identity was stolen she was notified she owed $US 7,000 to three different banks. After that someone was able to buy mobile phones in her name.

“How did this happen? You have to show your original passport when applying for credit, and it had my picture. But in the application form there is a picture of a different person who does not look like me at all. The swindler took credit from three different banks this way. It is either negligence on the part of bank employees or they were involved themselves,” said Legoshina.

Marianna was determined to fight the fraud. She spent hours in banks and with the police trying to prove someone else bought the goods using her identity, and in this case it wasn't in vain. The perpetrator was caught and pleaded guilty.

Sergey Mikhalev wasn't so lucky. Two years ago he bought a car which, in effect, he never truly owned. It had been pawned by someone else, but quickly sold to him before it was handed to the pawnbroker. Sergey ended up paying someone else's debts.

“A bailiff just came with the court's decision and took my car. I should have taken the hint and paid the bribe. It would have given me time to resell the car to some other unfortunate person, but this is against my principles,” Sergey Mikhalev said.

Instead Sergey decided to follow a legal path to prove his innocence. However, doing the decent thing has not put him back behind the wheel. Two years on he is still a pedestrian - neither car nor money has been returned.

Both victims say bank employees were involved. Andrey Emelin from Russia's bank association refutes the allegations.

“It's not easy to get credit. Bank employees are always very careful. It could be the people themselves were inattentive,” said Emelin.

Andrey Emelin says that there are gaps in Russian legislature which criminals currently exploit to make a profit.

Several years ago people in Russia were blaming banks for tightening their credit procedures. Banks yielded and dozens of so-called express credit schemes were introduced: credit in five minutes, with no collateral.

But while it's become easier for borrowers, it's become easier for the fraudsters to make a fast buck too. Now the question is - what will the banks and authorities do to stop them?

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