“Defaults” are a structural part of the business of lending. For years banks, NBFCs, even lenders from the unorganised sector have borne losses as people would conveniently take a loan with malice in their intent to never return it. After ages of being through this, back and forth, banks became firmer with those who would have their name in loan defaulter list. The fact is that all those who default don’t do it intentionally.
Banks engage recovery agents who would look at all through blue glasses and would treat all subprime borrowers the same way. After receiving a lot of complaints from public against banks and several litigations filed against their “threatening” mode of recovery, RBI issued guidelines that bound the recovery agents to approach the borrowers in distress in a certain way.
Here are a few things that they can do and those that they cannot do.
It has been clearly noted in their guidelines, “that banks can rely only on legal remedies available under the relevant statutes while enforcing security interest without intervention of the Courts.”
If a customer doubts that a particular agent or debt collection agency is flouting the said guidelines, they can report to RBI against the bank. RBI takes such complaints of violations very seriously and shall take appropriate action against the mentioned bank.
RBI has requested all banks to periodically review the agencies and the mechanisms undertaken for recovery and inform RBI about the same. This will help them learn from experience and improve on further course of action.
Primarily the business of a debt collector is to contact, convince and collect overdue debt from a delinquent borrower. This amount is paid to the original creditor while the agent in return earns a commission on the amount recovered. Since their commission is linked to the amount regained therefore it was observed that some agencies would resort to abusive practices that were clearly against the law. So RBI specified certain guidelines that bound them to contact the borrowers in a respectful and lawful manner.
In short, agents cannot do things that would harm you when trying to make you pay up past due debts but if you are past due then expect a collection agent to show up at your door.
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