The microcredit fraud scheme highlighted fictitious auctions by bailiffs

In Albania, the microcredit fraud scheme, which is being investigated by the Prosecutor's Office, has highlighted, among other things, serious suspicions about fictitious auctions for the sale of seized properties of debtor citizens. In fact, this phenomenon, according to experts in the field, is one of the deep problems in the execution of executive titles by bailiffs, due to abuses in this process. Experts urge legal improvements, suggesting the establishment of a national auction center.

"Neither I nor my son nor my husband participated in the auction of our house. The sale price was set at 400 euros per square meter. The house is on the seashore. I don't know how they got it. They took him without notice. A neighbor told me that 10-15 policemen came and we were very scared," Hajrie Vezi from the city of Durrës told Voice of America.

She is one of dozens, hundreds of citizens who, after problems with loan repayment, have had their property sold as collateral in the bank by private bailiffs, through unclear procedures.

In many cases, citizens are not notified of the time and place of the auction where their property is sold. But not only them, but also those interested in getting involved in this market do not have it easy, according to experts, since the abuses in this field are great.

According to an instruction of the Council of Ministers of 2012, there are several steps that the bailiff must perform until issuing the decision to sell the object at auction. This decision is finally posted in public places, such as at the office of the bailiff, in the place where the object is located, at the court that issued the execution order, in the municipality, municipality, municipal unit, in other places that the bailiff deems appropriate or and two newspapers with the highest circulation.

But even if all these steps are completed precisely, experts in the field still think that the legal definitions of 12 years ago were drawn up with the mindset of the past and not of the future. It is a manual process, without using any of the powers offered by technology for a completely transparent auction, Spiro Brumbulli, Secretary General of the Albanian Association of Banks, tells VOA.

"The fact that a bailiff closes the entire sale process inside his office, or after he has sent a notice to the district court where the decision was taken, and he says that I have done my job, that here the process is over and the market is not has knowledge. At the moment, the problem of microcredits was discussed so much and there are so many problems in the way of executing the properties, precisely because there is no transparency and there is no procedure. They are executed as if it were a mafia group, they are closed in on themselves and he says – this is what I do because that is what the procedure tells me, and the Code of Civil Procedure. Not to mention that there are also accusations. We also hear abuses of the type that these are closed between friends, he waits for the second auction and takes a property. There is no notification, there are no other competition requests and thus the information is lost. The way we have today does not develop transparency, does not open the market and does not allow the movement of capitals to become part of the economy" - says Spiro Brumbulli, Secretary General of the Albanian Association of Banks.

The Code of Civil Procedure also provides for the steps of the auction. After the value is determined by an independent expert, the property is auctioned at 80% of this value. If the property is not sold, a second auction is conducted where the bailiff sets a price not lower than 30% of the initial price set in the first auction, and if it is still not sold, a third auction is held, with a price not lower than 10% of the price in the second auction. But the lack of transparency and abuses, according to experts, mean that few properties are sold at a low value, to the creditor himself or to predetermined persons or entities.

"Auctions are often not made public, they are kept secret and if someone, a relative of the debtor wants to buy this property of his at auction, they are often rejected because they have found the buyer without the auction" - says lawyer Arben Llangozi.

In these conditions, for several years the options to improve the auction procedures and to bring them closer to developed countries have been at the center of discussions between the banks' association, the National Chamber of Private Judicial Enforcement and the Ministry of Justice.

"We have been looking for another variant that is also known in developed countries, to be a national center of electronic auctions, which can receive any property placed by bailiffs and anyone else, and be there as a stock exchange, demand and bids for certain assets to be met on the stock exchange and sold. It doesn't matter if the property is in Tirana, Saranda, or Tropoja, but anyone interested in buying a property in a certain territory has all the necessary information with one click in one place. This is what we have to do today and what is required" - continues Mr. Brumbulli.

Even the lawyer Llangozi comes with a proposal regarding the auction procedures conducted by the bailiff.

"That there is a need for improvement, this is not discussed. There should be a special place where the auctions take place. There should be a special commission where auctions take place and a national auction center. In my opinion, every auction should go to court and the property should be alienated only through court decisions" - continued Mr. Llangozi.

According to experts, the social consequences that have brought abuses in the market of auctions of seized properties are great. A quantity of properties that have benefited from the auctions worth around 800 million euros, have been owned by banks for ten years, but in the free market this value is thought to be higher. Mr. Brumbulli says that with these forms of auctions, their sale has not become possible. The other party that suffers damages are the debtor citizens, as their property is sold at 50% of its value, he argues.

In a response to the Voice of America, the National Chamber of Private Bailiffs informs that since 2023 it has established a national chamber for the development of auctions in Tirana, equipped with technology that serves the transparency of the auction process. But the private executors are not obliged by law to conduct the auctions there, and the problems do not seem to have been resolved.

"We cannot investigate and judge such irregularities, as it is the criminal prosecution bodies and the judicial system that deal with those who abuse the law. Of course, everyone who abuses the law must face the consequences of abusing the law" - said Alban Ruli, representative of the National Chamber of Private Bailiffs.

The Voice of America also asked the Ministry of Justice about concerns raised by interest groups regarding fictitious auctions of properties seized by private bailiffs. Referring mostly to the issue of microcredit fraud, from which this phenomenon reemerged, this institution announces legal changes aimed at improving the public functions of each institution or private public entity in the service of the community and consumer protection, as written in the written answer. But experts think that the legal changes in this area will have to affect the Code of Civil Procedure, and that this will necessarily require the consensus of the opposition in the parliament, since the single majority does not have the 84 votes needed to change it. / VOA