InvestmentYogi: Timely financial planning prevents you from falling into credit card or any other debt. If you are already in debt then deal with the recovery agent as per the suggestions given below and take control of your finances using the tools of financial planning.
Let"s get something straight…any kind of loan agreement whether involving the purchase of an asset or not, is first and foremost a civil contract. Therefore any failure on part of the borrower in respect of repaying the borrowed amount in part or full can be remedied only through legal procedure i.e. civil remedy through court.
So very simply, a bank or financier does not have the right to use force on defaulters and deploy musclemen for the recovery of loans.
But there are numerous instances when they do exactly that, and sometimes to grave and often fatal consequences leading to suicides by the defaulters. Banks have internal debt recovery cells or departments and also use third party agents for recovery of loans. The Debt Recovery Agents often work on a commission linked to recovery amounts and therefore they are highly motivated to show results by use of any kind of means – threats on phone and in person, public humiliation, and other ways of intimidation – verbal and sometimes also physical.
In the bank or financier"s defence the legal and judicial system is indeed very slow and any case that they may file against the defaulting borrower will take a long time to settle, however this does not justify use of force or illegal means and a consumer needs to be aware of this and not get intimidated.
The Reserve Bank of India in order to protect the interests of both the borrower and the creditor in the debt recovery process, has issued certain guidelines that a recovery agent and the bank that employs him have to honour.
- The borrower has the right to decide a place to meet and a time to be contacted by the recovery agents. He can also choose the time and place to receive calls from the agent.
- He can ask to see the agent"s ID and letter of authorization from the bank.
- The recovery agent has to deal with the borrower with decency and proper decorum.
- The borrower has a right to privacy and the agent should not discuss his debt situation with a third person.
- The borrower can seek assistance to resolve the dispute or differences regarding dues.
- During bereavement in the family or calamity, the borrowers can tell the agent to not visit or call.
The borrower can complain to the RBI on non compliance with the above or any other kind of harassment by the bank. Further, failure to incorporate the RBI"s guidelines could lead to the central bank invoking a ban on engaging recovery agents by the bank in a particular area, either jurisdictional or functional, for a limited period. In case of persistent breach of its guidelines, the RBI may extend the period of the ban or the area of ban.
How to deal with the situation
The borrower on should remember the following
- to not get intimidated
- to not react aggressively, use harsh language or retaliate physically even when provoked by the recovery agent.
- to not avoid the recovery agent or the truth that you have an obligation to pay
- to not sidestep close questioning in as much as it relates to his ability to pay.
- to not make false promises to either buy more time or to put off the agent for some time.
The borrower should as far as possible be calm, reasonable and
- Confirm the identity of the recovery agent and ascertain if he in an employee of the bank or a third party.
- Take detailed notes of all communication, written and verbal and if possible even record calls and of course keep copies of documentation.
- Express to the recovery agent, his willingness to pay his dues.
- Inform the agent that he would file a complaint with the RBI and the Bank if he gets abusive or issues threats of any manner.
- Approach the bank for direct negotiations if he doesn"t want to deal with the recovery agent.
- Complain to the RBI if things get out of hand.
All things said and done, the best thing that the borrower can do to avoid this situation is of course, borrow only to the extent required and to the extent that it is within his means to repay so that he never defaults on the loan in the first place. After all, the debt recovery agent would have come into this situation, only because the borrower has defaulted on his obligation to pay!