The media seems to have been taken over by reports about the high handed and illegal behavior of recovery agents trying to recover money on behalf of their banking clients. Apart from humiliation in front of colleagues and family members some defaulting loan consumers have faced physical threats and intimidation as well. Reports of consumers being driven to suicides and medical problems (like heart attacks) being caused due to the threatening and menacing behavior of the recovery agents has the principal banks running for cover disclaiming any responsibility for the action of the recovery agents acting on their behalf.
Collection of dues has become big business, with a large number of collection agencies working on behalf of banks. Many of these agencies are quite large, with a countrywide network of offices. However this business is unregulated with a result that most such outfits have very low standards and almost no staff screening procedures. There are a few well regulated and professionally run collection agencies which work within the boundary of laws and yet do a good job. However they are an exception rather than the rule.
Stories are rife about the heavy-handedness of the recovery agents. Despite the stringent guidelines laid down by the Indian Banks’ Association (IBA) as well as the regulator, Reserve Bank of India, banks still continue to appoint such recovery agents and are tolerant about the extra legal process followed by the collection agencies till a shocking incident takes place.
So what can be done by the loan consumer who is faced with such recovery tactics?
1) Do not ignore a dispute with the bank. Stories about consumers not paying up (unjustified) fees charged on their credit cards and stopping the usage of the credit card are quite common. The consumer hopes that it is the end of the matter. However over a period of time these dues (along with penal interest, late payment charges, etc.) pile up to a neat sum and that is when the recovery agents get into the picture. So as soon as you get into any such dispute make a written complaint to the bank and get acknowledgement.
Do not waste time making a telephonic complaint to the call centre unless the centre gives you a reference number for your complaint. You can also file a complaint on the bank’s website at the link kept for this purpose. If the bank does not respond within 2-3 weeks of a formal complaint you should file a complaint with the banking ombudsman appointed by the RBI. Details of the banking ombudsman in your area are available on the RBI’s website (www.bankingombudsman.rbi.org.in). Normally these issues will get resolved at the very mention of the banking ombudsman. In other cases the banking ombudsman is likely to provide relief in your case immediately.
2) If you are genuinely in default then try and engage in a dialogue with the bank. If you can make some payment or provide some additional security the bank might be willing to reschedule the payments for a short period of time. Remember that your default will be reported to the credit bureau and you will find it extremely difficult, if not impossible, to get another loan in future. So it is in your interest to try and resolve the issue.
In either of the two situations, the recovery agents cannot proceed with any strong arm tactics. In fact the IBA has laid down the following guidelines for recovery proceedings:
1. The customer should be contacted ordinarily at the place of his/ her choice or at his/ her residence or even at the place of business/occupation between 7 am and 7 pm. Bank representatives should avoid inappropriate occasions such as bereavement in the family while making calls/ visits to collect dues.
2. The bank should ensure that all written and verbal communication with its borrowers is in simple business language and should adopt civil manners for interaction with borrowers.
3. Written communications, telephonic reminders or visits by the bank’s representatives (including recovery agents) to the borrowers place or residence can be used as loan follow up measures. The bank will then give a written notice about any legal or other recovery measures including repossession of the security.
4. The bank should be willing to consider handing over the property to the borrower any time after repossession and before concluding sale transaction of the property, provided the bank dues are cleared in full.
If the recovery agents do not stick to the above procedure, you can follow the below process:
1. If you receive abusive/threatening calls, record the call, making sure that the caller gives details like the bank he represents etc.
2. Complain to the bank along with a full transcript of the call. If recovery agents harass physically, then describe each and every detail of the incident minutely in writing. Witnesses, apart from family, can also be quoted in the complaint.
3. If the bank does not take any action within a month from the day you file the complaint, or rejects the complaint, or you are not satisfied with the action taken by the bank, file a complaint with the Banking Ombudsman or online at www.bankingombudsman.rbi.org.in.
4. You should also file a police complaint along with the complaint filed with the Ombudsman.
One interesting thing to ponder would be to find out why have things reached such a pass, that the otherwise respected and responsible corporate banks have to appoint such recovery agents?
Before we get into this debate I want to make one thing clear. I am no apologist for banks (though I worked for one a long time ago) but their side of the story deserves to be heard as well.
It is clearly unfashionable to champion the cause of mighty corporate giants against the loan consumer (the classic story of David versus Goliath is completely reversed here). At the risk of being unfashionable let me point out a few facts that tend to be glossed over:
1. Banks use recovery agents when you fail to pay your dues on time. What you borrow is the money that belongs to the depositors of the bank (as much members of the public as the loan consumer). Therefore, when the borrower defaults in paying back that money, the depositors suffer. And if the bank is trying to recover the borrowed money from you, it is only trying to protect its depositors’ money. If the overdue are allowed to be piled up, it is the depositors that will suffer.
2. Responsibility is a two-way street. So, while banks should act within law when collecting dues, consumers too have to play their part and pay installments on time. Actually, here’s where the need for financial education arises. Financial education or money management should be made mandatory for the young, so that responsibility towards money is instilled in them. Another thing would be to regulate the recovery business and ensure banks use only licensed recovery agents.
Now, irresponsible individuals, who default, and believe they can easily get away with it and get another loan, whenever required from another bank, are wrong. What they do not know is that, if they default, the credit bureau will ensure they will not get another loan easily.
So, hopefully, the number of such cases will reduce in the future.