Keep these things in mind when facing an unruly recovery agent

As lenders fear a surge in non-performing assets (NPA) due to financial stress among borrowers, the instances of recovery agents using coercive tactics are on the rise. Kolkata-based Sanjoy Chakraborty took personal loans from two non-banking financial companies (NBFCs). September onwards, recovery agents of both the lenders started calling for repayment. “After abusing on the phone, the recovery agent of one of the NBFCs came home. My mother was alone and the agent threatened her and asked to repay immediately,” said Chakraborty.

In the evening, when Chakraborty got to know about the incident, he filed a complaint with the police. The 44-year-old had started working as a security guard after suffering losses in his business. Borrowers like Chakraborty, who are unable to repay loans, have to deal with recovery agents, which is not a pleasant experience. Lenders are, however, not supposed to use coercive tactics for recovery. The Reserve Bank of India (RBI) has laid down guidelines, defining what the recovery agents can and can’t do.

Know your rights

The Banking Codes and Standards Bureau of India (BCSBI), an autonomous body of banks, has laid down fair practices code. According to BCSBI’s Code of Customer Rights, lenders are supposed to communicate when they initiate recovery proceedings. Banks must also provide borrowers with the name of the recovery agency or the agent who will handle the case.

Agents can only contact the borrower between 7:00 AM and 7:00 PM and they cannot visit them unannounced. If a recovery agent wants to meet, the borrower must decide the place and the agent must respect the privacy of the borrower and interact civilly. The recovery agent must carry an authorization letter from the bank for the meeting.

If the borrower is not contactable, the recovery agent can approach friends, relatives, or anyone else, to trace the borrower. It’s the customer’s duty to keep updating the contact details with their lender.

According to separate guidelines by RBI, banks cannot forward recovery cases to agencies if a customer has raised any grievance until the lender settles the complaint. If the bank fails to act within 30 days, the borrower can contact the banking ombudsman. All institutions involved in lending, like banks, NBFCs, peer-to-peer lenders and asset reconstruction firms, must follow the guidelines.

Dealing with violator

It’s not easy to make lenders initiate action against their recovery agents, if they don’t stick to the guidelines. Lenders are held responsible for the actions and the behaviour of their agents, as per the regulations. Lending institutions, therefore, maintain that their agents do not violate any norms.

When recovery agents call borrowers, they are required to record calls and maintain them. If customers complain to their lender that the agent was threatening or abusive, the financial institution should be able to go through the calls and investigate. But rarely lenders do that.

According to consumer organizations, if agents violate regulations, a customer must first approach the lender. If it doesn’t respond or maintain that there has been no violation, the customer should write to the banking ombudsman.

“In the meanwhile, if agents continue to trouble borrowers, either on the phone or by visiting their homes or office, they can approach the local police station and file a complaint,” said Dr. M.S. Kamath, secretary, Consumer Guidance Society of India (CGSI), a consumer organization.

When Chakraborty approached his lender and complained that he had received threats on the phone as well as when the agent visited his house, the lender maintained that it had investigated the matter, and found that there was no violation of the regulations.

In many cases, recovery agents call from numbers that are difficult to trace to the agency or the bank and in some instances, even sent messages on WhatsApp. “If the lender and the recovery agency don’t admit that the person contacting the customer is their representative, borrowers must file a complaint with the cybercrime division of the local police,” said Kamath.

But the local police may not file a first information report (FIR) as they treat such cases as non-cognizable. In such cases, the borrower can file a non-cognizable complaint. Another option is to approach a consumer body. They can not only mediate between the borrower and the bank or the regulator but also help in getting relief for genuine cases if the lender was not favourably responding to the customer. According to Kamath, CCSI has taken up complains against recovery agents with the Consumer Education and Protection Cell of RBI.

Approaching the court is also an option but may not be practical. “It’s expensive and time-consuming. It would be less expensive for a retail borrower to pay off the loan than hire a lawyer and file a court case,” said Bejon Kumar Misra, a consumer policy expert.

Borrowers must, however, not avoid talking to recovery agents. They should also avoid fighting with them even if they threaten or misbehave. Lenders have the right to call friends, relatives or workplaces of borrowers if they are unreachable. To trace borrowers, agents can also visit their workplaces or homes.

Write to the nodal officer of the bank explaining your financial situation, willingness to repay, and with a plan for it.