Community principle for consumer credit cooperative shareholders, pawnshop register: new in microfinance regulation

The law sets forth requirements for shareholders joining consumer credit cooperatives (CCCs) based on regional, social or professional principles. The amendment is intended to help bring about the real community of CCC shareholders and put an end to the operations of mala fide organisations which use the legal form of a CCC for unfair practices including Ponzi schemes.

The law updates the procedure for a consumer credit cooperative’s general shareholder meeting, its members’ rights and executive bodies’ powers.

Also, the law modifies the procedure for pawnshops’ access to the financial market, authorising operations of only pawnshops the Bank of Russia includes in the state pawnshop register. The regulator’s website will publish data on such pawnshops for consumers to check. The Bank of Russia’s decision to strike a company off the pawnshop register will entail its loss of pawnshop status. The arrangement will enhance consumer protection from illegal lenders representing themselves as microfinance institutions.

Under the law, major consumer credit cooperatives and microfinance organisations shall disclose detailed information on their operations on their corporate websites in the Russian domain extension.

The modifications are intended to protect financial consumers’ interests and put an end to unfair consumer lending practices; they further standardise legal requirements for professional lenders.