Last week, Postimees published an article on a vile case of enslavement in Pärnu where a man was kept in inhuman conditions for weeks while his enslaver used his identity to take out loans and make purchases.
Cases handled by the Police and Border Guard Board (PPA) show a systematic problem in quick loan and credit business that could be addressed. Head of the severe crimes unit of the Northern Police Prefecture Roger Krumm says that change depends on the social responsibility of companies.
Roger Krumm, your bureau has handled several cases where people with modest social skills have been taken advantage of for the purpose of loans. Figureheads. Several have lost everything they have to end up on the street. What has led to this situation?
The ways we can supervise loans and leases of credit providers are currently limited. It is possible that is one of the reasons. Crooks know the system has weak points. One such vulnerability is creditworthiness assessment. Another is definitely modest interest of companies to properly identify persons. The latter claim is based on cases we're currently handling. I give you my word!
Companies are interested in new clients, which is why they are less than diligent in running background checks. This creates the opportunity for criminals. They understand that using a figurehead's personal information or controlling them they can take out loans or lease things in their name. Whether using the person's information online or physically taking them to the bank.
Provided client identification and creditworthiness checks do not improve, we will always be one step behind. The case in Pärnu will probably not be the last of its kind.
The law is lax on lending?
I wouldn't say the law is too lenient. The law never says yes or no, it is always a range. The current law obligates credit providers to evaluate the creditworthiness of clients. Rather the question is how it is done and whether it's enough.
There are a lot of companies, and the level of responsibility differs. There are those who work diligently, and there are those whose skills and perhaps will are more modest.
Why are companies not diligent in terms of background checks?
Figureheads are most often used to lease smart devices. Perhaps major companies figure the loan and the risk to be small enough to warrant granting it. It is possible companies provide loans based only on documents people give them. I dare say most smart devices are sold that way – superficially. No one is really looking at the person's existing financial obligations. The company just takes the person's word and grants the loan.
I do not want to accuse companies because they cannot always check people's income. They have no access to salary data.
However, when it seems documentation is in order, it is possible to look at other things. These figureheads are taken to shops by the people conning them. When the employee pays no attention to this, we can say the mistake is inherent in the process. Asocial-looking customers should set off some alarm bells. It would not have to warrant a negative decision; however, it could mean additional questions to convince the seller the person is in charge.
It seems odd when an asocial-looking person walks into a store to buy a tablet computer. It could be part of the standard process to ask them what internet package they intend to use. I can tell you my plan for the tablet and what data plan I'm going to need. A person who does not need the device won't have an answer. They might even admit they were sent to buy one. It is a matter of the social responsibility of companies. The latter is definitely lacking right now, and we cannot regulate everything with the law.
Therefore, a client's solvency can and should be evaluated as a whole.
But why should companies do that? Let us be honest, they do not currently suffer any significant damage – the investigation will be handled by the police, the conviction by the courts, and the collecting by bailiffs. While they might not get their money back each time, these losses are included in profit margin calculations. The state foots the bill, while the firms keep the profit. Couldn't the law be used to increase their responsibility?
It already does. The problem today is not major banks, it's small and medium credit providers. Mostly in the fast loans and leasing sector. These companies often do not realize they are authorizing other sellers to act in their name. Let's say a leasing provider gives an electronics retailer the right to grant leases – they authorize the salesperson to sign leasing contracts.
Once problems surface, like the cases we are currently working on and the one in Pärnu for instance, they can be held liable pursuant to the credit providers act. For example their license from the Financial Supervision Authority can be revoked so they can no longer be active in the credit business. The law changed a year ago when smaller credit providers had to apply for activity licenses.
Together with the consumer protection and financial watchdogs we invited these companies for a roundtable meeting to discuss contemporary problems in the field last year. We talked about these very things – creditworthiness checks, identification of clients etc.
The financial supervision authority sent a signal that they will check compliance with obligations more often. Because the law entered into force recently, companies needed time to adjust. Now a year has passed, and I believe that sensible time for making changes is done.
In your opinion, do credit providers acknowledge the problem?
I would come back to that roundtable meeting. It showed they largely do not. Like you said, they've included the risk in their profit margins. Some transactions fail, but there are plenty of others to compensate.
We have a great many credit providers, and if we were to divide all these fraudulent loan applications between them, each would only a have a few dozen cases a year. It it is not a problem for them even if they never see that money again. They said they make €600 million a year between them but only lose €3 million.
From the state's point of view, it requires colossal resources, even if we don't look at the human side of these practices. Detectives often have to scour the four corners of the country looking for these asocial people – they do not have phones, street or email addresses. Courts have to hear all these matters individually in a situation where they are overloaded as it is. And finally bailiffs have to go out in search of that money.
So the cost here is far more than €3 million. These are only the cases we have been notified of. We do not know how many such cases remain hidden. I'm sure there are cases where these asocial people end up paying for these phones out of their pension or benefits. Unfortunately, they do not always come to the police, either because they are unaware of their rights or ashamed.
How big could this hidden part be?
It is very difficult to say. I see that whenever we bring out a major case like that, we get an avalanche of reports immediately after. People realize we are dealing with such problems and come out. As long as it is not advertized, people do not even know it is something we handle, or that it is a problem in society.
When the media has written about some of our bigger cases, we've seen that people do not even know the expressions loan and leasing fraud. However, once you describe how a group of men came to the village shop to offer people a way to make money, they recognize themselves and realize they, or their friends, have fallen victim to similar crimes.