Harassed by loan recovery agents? Here's help

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.

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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.

Here are a few tips on what to do when faced with unruly loan recovery agents: 

What can the loan consumer who is faced with such recovery tactics do?

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 banks' 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.

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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.

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:

~ 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.

~ 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.  

~ Written communications, telephonic reminders or visits by the banks' 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.

~ 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 procedure:

1. If you receive abusive/threatening calls, record the call, making sure that the caller gives details like the bank s/he represents.

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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.