The media seems to have been taken over by reports about the high-handed and illegal behaviour 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 behaviour 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.

Infamous agents

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 law 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) (see box on right), 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? (See green box on left)
In either of the two situations, the recovery agents cannot proceed with any strong-arm tactics.

But why have things reached such a pass, that the otherwise respected and responsible corporate banks have to appoint such recovery agents?

The other side

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 is 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.

The author is CEO of apnaloan.com and can be contacted at ceo@apnaloan.com

• How to deal with it
  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.
• 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.

Procedure for sweating customers

If the recovery agents do not stick to the above procedure, you can follow the below process:

• If you receive abusive/threatening calls, record the call, making sure that the caller gives details like the bank he represents, etc.
• 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.
• 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.
• You should also file a police complaint along with the complaint filed with the Ombudsman.