By Karnoto Mohamad
IT has been fifteen months that people have been through difficult times due to the COVID-19 pandemic. Since the second month of the pandemic, many business people have started to experience cash-flow bleeding so that they are unable to pay bank instalments and have to cut employees. Low-quality credit grew and the Financial Services Authority (OJK) issued a policy of relaxing credit restructuring. According to OJK data per March 2021, restructured bank loans amounted to Rp808.75 trillion from 5.55 million debtors. Meanwhile, the financing restructured by the multi-finance industry amounted to Rp198.27 trillion with 5.09 million contracts.
According to Infobank Research Bureau, there are two important issues from the impact of the COVID-19 pandemic that hits the domestic economy. One, the increasing unemployment rate. According to the Central Statistics Agency (BPS), there was an addition of 1.82 million people within a year to 8.75 million people in February 2021. That is just open unemployment in the informal sector; not including the 7 million new unemployed from the informal sector due to the bankruptcy of 34 million micro, small and medium enterprises (MSMEs). The large number of people who have lost their livelihoods weakens the purchasing power or spending of the people, which contributes up to 56% of the gross domestic product. As a result, economic growth throughout 2020 contracted 2.19% and the Indonesian economy in the first quarter was still minus 0.74%.
Two, expanding uncollectible credit will affect the balance sheet of the bank as the main creditor institution so that its ability to disburse creditors will decrease. It should be noted that one of the causes of the 1997/1998 monetary crisis was due to the mounting of uncollectible credit. Now, despite being driven by various monetary and macroprudential stimuli, banks are very careful about extending their credit because the risk of uncollectible credit is getting bigger. This was indicated by loan at risk (LAR) which increased from 11.98% in 2018, 12.93% in 2019, 22.65% in 2020, and 23.71% in February 2021.
Therefore, banking and multi-finance institutions strive to maintain the quality of their productive assets. While observing the development of credit restructuring that was affected by the COVID-19 pandemic, banks that do not want to have problems with non-performing loans (NPLs) are also trying to “catch up” debtors whose loans are problematic. Likewise, multi-finance companies are “chasing” customers who have not paid instalments for three months, because, multifinance companies themselves must also carry out their obligations to banks which are the main creditors.
For debtors who have been in arrears for more than 90 days, banking and financing institutions usually use third party services to collect and execute collateral assets for debtors who have stated that they are unable to carry out their obligations. Unfortunately, debt collectors themselves often become the culprit for bad debtors, even though they are already certified and have a letter of assignment complete with other documents and fiduciary certificates. President Joko Widodo’s (Jokowi) statement at the beginning of the COVID-19 pandemic, which instructed the public not to be chased by credit instalments and debt collectors, seemed to inspire debtors not to pay credit instalments and dare to fight debt collectors.
In early May, Pangdam Jaya (Jakarta Military Command) chief said that debt collectors as professions that must be eliminated in the aftermath of the viral video of 11 debt collectors that confronted Honda Mobilio, which was eight months in arrears at Clipan Finance. In fact, this incident was only a result of a series of incidents because the car, which was the asset for fiduciary security, had changed hands and its execution was difficult. What debt collectors did is a result of the behaviour of customers who did not pay their credit instalments. And if the debt collector action violates procedures, that does not mean it represents the face of the multi-finance industry. Including the collection service industry that is already covered by the law and they also pay taxes to the state.
When contacted by Infobank, OJK confirmed that multi-finance companies can still use debt collectors. “Financial companies can still use debt collectors, there is a contract between finance companies and debt collectors. It must comply with existing regulations,” Sardjito, the Deputy Commissioner for Education and Consumer Protection at OJK, told Infobank last May.
According to OJK Regulation Number 35 / POJK 05 / 2018 concerning Financing Company Business Conduct, Financing companies can collaborate with other parties to perform a collection function for debtors who have defaulted at least by providing a warning letter in accordance with the timeframe in the financing agreement. Debt collectors who collect must be under a legal entity that has a license and debt collectors are required to have a professional certificate in the field of collection from PT Sertifikasi Perusahaan Pembiayaan Indonesia.
When the execution of fiduciary assets will be carried out, the conditions are that the debtor has been given a warning letter, has been proven of default, and the finance company has a fiduciary guarantee certificate, a certificate of mortgage rights, and / or a mortgage certificate. “Even though multi-finance companies already have fiduciary rights, the execution must be carried out in the right way, namely according to procedures, complete with complete documents such as fiduciary certificates, summons, debtors have declared defaults and did not answer summons,” said Suwandi Wiratno, the Chairman of the Association of Indonesian Financing Company (APPI), to Infobank last month.
Debt must be paid, but many bad debtors are resourceful so that their vehicles are not towed. However, the bad image of debt collectors as a frightening figure has already stuck in the minds of residents, so that people who carry out the professions are uncomfortable. In fact, some were beaten up by the masses and lost their lives. In the midst of the COVID-19 pandemic which is accompanied by raising unreasonable unpaid credit arrears which should be their blessing, debt collectors also feel a very bitter period. One of them is Petrus K. Abi, a certified debt collector from PT Lesto Abadi Jaya, who along with his friends claimed to have lost their jobs during the pandemic.
“Previously, we could execute three to five units of cars a week. Now, we could only execute one to three units a month,” he told Ari Nugroho from Infobank last month.
Unfortunately, debt collectors do not get a salary and must pay for their own operational activities. Therefore, debt collectors only have one option at work: they must be successful in the job, either via the soft way or the hard way.
Debt Collectors May Reach Rp484 Trillion
The amount of money that debt collectors can collect is very large. The indicator is the potential for credit and uncollectible financing that is expanding due to the COVID-19 pandemic. According to the calculations of Infobank Research Bureau per March 2021, the potential for uncollectible credit or financing reaches Rp 484.39 trillion. This figure comes from the banking sector amounting to Rp430.79 trillion which is calculated from the total NPL of Rp173.77 trillion plus an assumption of 20% of the LAR of Rp 1,285.12 trillion which is estimated to fall into NPL. Then, it is added with Rp53.60 trillion from the multi-finance industry which is calculated from non-performing financing (NPF) of Rp 14 trillion plus the assumption of 20% of the restructured financing of 198.27 trillion which is estimated to fall into NPF.
From the potential uncollectible loan amounting to Rp484.39 trillion, debt collectors have the opportunity to reap commissions as their income of Rp12.11 trillion to Rp48.44 trillion, assuming they can collect all of them. With an average of 6-7%, then the commission that becomes debt collectors’ income will reach Rp 30 trillion and even if only 10% is collected, the commission that can be earned is Rp2.40 trillion. It is not a small number. So, the potential for the credit collection service business is actually very attractive.
Recently, there have been 125 companies that have collection service licenses, not including law firms that provide asset recovery services. One company employs a minimum of 100 people, but some of them work in two companies. If a quarter of the people work in two companies, then there are around 9000 debt collectors in this industry. They do work that can no longer be done by internal bank collectors or finance companies. Especially if the debtor is stubborn, is unwilling to cooperate, and difficult to find. The job is also hard to do if the location is far away and is placed near the headquarters of mass organizations.
Therefore, not everyone can carry out a job as a debt collector. Besides understanding the asset recovery process, it takes courage. This is because, although the regulations are clear, the law enforcement is not clear. When the process of executing fiduciary guarantees was carried out so rigorously that they had to ask for assistance from the police as an intermediary, the debt collector position tended to be cornered. In fact, the procedure has been carried out and a complete document letter and debtor evidence states payment refusal as a condition for executing the fiduciary security held by the debtor.
What is even more difficult is when a debtor involves a/mass organization/s (ormas) so that there is a risk of a collision, which is often the debt collector in the position to be blamed. Moreover, as said by an Infobank source, there is an account officer who makes secret deals with debtor for their own interests.
If there is a debt collector who violates the procedures, for example treating the debtor harshly, all parties agree to be prosecuted according to the applicable law. However, the execution by debt collectors of fiduciary collateral assets held by the debtor then creates disputes that lead to chaos, it is necessary to look at the chronology. Can the debtor be invited to cooperate? What are the procedures carried out by the debt collector (whether it is in accordance with the applicable regulations or not)? “If there is a commotion, people look at debt collectors, without seeing the cause. If there is an incident, we need to look at the chronology from the start,” Jelemone, a veteran of in the world of debt collectors, told Infobank last month.
The debt collector’s position must be viewed proportionally. As a credit collection support, debt collection service providers are parts of the financial industry ecosystem. The role is very much needed by the banking and multi-finance industries. It should be noted that millions of cars and motorbikes have been bought by people through loans. As many as 97% of the debtors are in current status. Of the 3% whose defaults and asset recovery were carried out by debt collectors, only a small proportion was not cooperative and had to collide with debt collectors.
As a halal profession, debt collectors who have certification should not be treated discriminatively when carrying out their work in accordance with applicable procedures. Most of them do not have high education and try to find lawful jobs. It is almost certain that there is no one who aspires to become a debt collector. Meanwhile, looking for a job is not easy—even before the COVID-19 pandemic, it had not been something easy to do.
The debt collector professions also pay taxes just like other financial institutions or collection service providers that cover them. Debt collectors receive a commission or success fee after being deducted by 12% as PPH and PPN taxes. The government, which has had difficulty creating widespread employment opportunities for the community, should protect all professions, especially for jobs that pay taxes and jobs have clear rules. People should never underestimate debt collectors. People should not be hostile towards debt collectors and, on the other hand, they defend those who do not pay loans.
Discriminatory treatment can lead to collective disappointment that disturbs regional emotions because the majority of debt collectors come from Eastern Indonesia, such as Maluku and East Nusa Tenggara. In fact, they only want to get halal (proper) jobs but are not absorbed in the world of work where the provision is limited due to economic growth that has never reached 7% since the reformation. (*)