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Russians Pull Out Credit Cards, and Consumer Debt Spirals

For some Russians, personal debt is akin to the garden plots of their parents’ generation. In that era of post-Soviet economic depression, many families short on money grew their own food, transforming their kitchens into storerooms of pickled vegetables, dried mushrooms and sacks of homegrown potatoes.

Despite the wretched poverty of those years, Russians entered the country’s capitalist era with some advantages. Families had no debt, and virtually every adult wound up owning the property where they lived. But they were also unschooled in matters of lending or in calculating reasonable levels of debt. And they were unprepared for a rush of predatory lenders offering quick loans burdened with high rates.

At the end of 2018, there were 2,002 payday lending companies in Russia, with many operating from storefronts in provincial towns and offering one-month loans with interest rates compounded daily. Established banks joined in, offering loans and credit cards with quick approvals.

Igor Kostikov, chairman of the Union for Protecting Financial Consumers, an advocacy group for debtors, said that poor Russians were accumulating payday-lending debt. “They are getting deeper and deeper in trouble,” he said. “The poorest will not be able to repay.”

On Vkontakte, a social media site, Russians swap stories of debt and bankruptcy, revealing the naïveté of their experience with debt.

One user, who identified herself as Helga, wrote seeking free legal advice. “Respected lawyers! I have an opportunity to take a loan of three to five million” rubles, or $48,000 to $80,000. “If I take it out, pay a few times, and then declare bankruptcy, what problems might arise?” She mused about possibly using the money for a down payment on a home.


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