How To Deal With Mental Harassment By Loan Agent?

Law
06-May-2024
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The mental harassment caused by loan recovery agents can end up taking a huge toll on a long-term life. This is why it is important to be aware of all the rights that you have as a borrower and know how to deal with such situations when they arise. The article aims to answer all the questions that you might have when dealing with such situations and also talks about the tactics that are used by recovery agents, RBI guidelines on recovery, your rights as a borrower, and the legal steps that you can take as a borrower.

Tactics Used By Recovery Agents For Loan Collection Can Be Considered Harassment

Here are a few examples of the tactics that recovery against use for loan collection comes under the ambit of harassment:

  1. Threatening and persistent phone calls
  2. Exceeding politeness standards by, for example, using derogatory words
  3. Sending offensive images
  4. Contacting the supervisors of the borrowers
  5. Intimidating coworkers or relatives
  6. Threatening to sue or make bogus arrest threats
  7. Entering the debtor's house or place of employment without authorization and making them feel uncomfortable in public.
  8. Using social media sites to find individuals
  9. Pressuring them to give up their houses or take out more credit
  10. Pursuing debtors for installment payments through several debt collectors
  11. Using corporate logos or desk work that appears professional but is not. Sending letters to people that appear to be court forms is one example.
  12. Forcing someone to make larger EMI payments when they are unable to pay off their debt in full. 
  13. Approach borrowers more than once in a single day, as it is illegal to do that.
  14. Utilizing your friends, neighbors, family, coworkers, and coworkers to spread rumors about the borrower and the loan.
  15. Making the borrower seem bad in front of the public.
  16. Pretend to be legitimate by using fictitious official identities, even if this is not the case.
  17. Harass and continuously interrupt the borrower's contact when they don't return their calls.
  18. Persistently intimidating and coercing debtors.

    However, not every strategy employed by the lender is deemed harassing because they have a right to pursue collection of the outstanding balance from the borrower. If the recovery agent contacts the customer's home at a fair hour, delivers previous updates, makes requests, or files a lawsuit, it won't be deemed harassment.

RBI Guidelines For Loan Collection Agencies

The personal loan recovery procedure is governed by particular criteria that have been established by the RBI. The purpose of these standards is to guarantee equitable treatment of debtors and moral recovery methods. Among these recommendations' principal features for the code of conduct of the loan collection agencies are:

  1. Fair Practices Code: When it comes to debt recovery, lending institutions must abide by a Fair Practices Code. The rehabilitation process's guiding values of openness, equity, and dependability are outlined in this code. It establishes the benchmark for interactions with debtors and the strategies employed in debt collection.
  2.  Prevention of Harassment: As per RBI, using any kind of forbidden, threatening, or abusive words in the process of loan recovery, will be termed under the blanket of harassment. It is important to treat the borrowers with respect and decency.
  3.  Privacy and Confidentiality: It is the responsibility of lenders to protect the privacy and confidentiality of the personal data that borrowers provide. Unless mandated by law, they should not divulge information about the loan to any parties.
  4. Grievance Redressal: It is important to remember that the borrowers have the right to seek relief from grievance redressal and the redressal to further help them resolve these issues quickly.
  5.  Recovery Agents: To help with loan recovery, lenders may use recovery agents. These agents are still required to follow the RBI's code of conduct, nevertheless. Agents ought to behave properly, have the appropriate identity, and follow the law.
  6. Fair Recovery Practices: The RBI guidelines place a strong emphasis on the need for fair recovery practices that do not subject debtors to coercion. During the rehabilitation process, recovery agents shouldn't utilize force or coercion.
  7.  Debtor's Rights: It is the right of borrowers to be informed about the specifics of their existing debt. A summary of the loan account, including the remaining amount, interest rate, and any additional fees, must be provided by lenders.
  8. Settlement Procedure: It is recommended that lenders establish a disciplined and equitable procedure for settling loans. Borrowers should be notified of their alternatives for loan settlement and this process should be transparent.

These agents are further legally entitled to follow guidelines, take the right steps, and not cause any harassment to any of the debtors in any way. Some of the steps that are to be taken by the recovery agents are as follows:

     1. When working with loan recovery agencies, banks need to follow a due diligence procedure, and they are accountable for any complaints brought against them

     2. it is necessary to notify borrowers in advance of the recovery agency's specifics.

     3. When meeting with the defaulter, the agent must also bring the authorization letter and a copy of the bank's notification

     4. Banks are not permitted to forward a complaint filed by a borrower to a recovery agency until the complaint has been resolved or otherwise dealt with.
     5. This is reversed, though, if the bank is persuaded—by evidence—that the concerns are baseless or unimportant.
     6. Additionally, the bank has to make sure that complaints from borrowers about the recovery procedure are properly handled.
Further, as per the extracts of paragraphs 172 and 173 of the Mid-Term Review of the Annual Policy for the year 2007-08, in case of violation by the recovery agents engaged by the banks, paragraph 173 is applicable:

“Complaints received by the Reserve Bank regarding abusive practices followed by a bank’s recovery agents would invite serious supervisory disapproval. The Reserve Bank would consider imposing a temporary ban (or even a permanent ban in case of persistent abusive practices) for engaging recovery agents on those banks where strictures have been passed/ penalties have been imposed by a High Court/Supreme Court or against its Directors/Officers with regard to the abusive practices followed by their recovery agents. An operational circular in this regard will be issued by November 15, 2007.”

Know Your Rights As A Borrower

The goal of RBI loan recovery rules is to safeguard borrowers from unscrupulous methods and ensure that they receive fair treatment. Borrowers have the option to file a complaint with the relevant lender if they think recovery agents are acting improperly.

Lenders are required under RBI rules for loan recovery to look into and address complaints against recovery agents as soon as possible. The lender must notify the borrower and take necessary action if agents are discovered to have engaged in wrongdoing.

As previously mentioned, lenders must have a grievance redressal procedure in place to address borrower concerns about recovery actions to comply with RBI standards for loan recovery. Borrowers now have the option to file a case against infractions of debt collection standards or escalate complaints to the RBI Ombudsman.

Borrowers must understand their rights and how to defend them during the personal loan recovery process. To protect your interests, consider the following advice:

  1.  Keep Lines of Communication Open: If you think you are being harassed, you should get in touch with your lender directly. This method can open up the gates to a different repayment schedule, as you get to negotiate with them directly.
  2. Recognize the terms and conditions of the loan agreement: Get acquainted with the terms and conditions of your loan agreement. Making educated selections can be aided by being aware of the precise provisions about recovery and default.
  3. Keep Records: Keeping records of all documents is very important. These records are the ones that become helpful in case of a disagreement and become evidence in case of a complaint against loan recovery agents.
  4. Seek Legal Advice: You should think about getting legal counsel if you feel that your rights are being infringed upon while you're recovering. Legal professionals can advise you on the best course of action.
  5. Use Grievance Redressal Mechanisms: Using the grievance redressal mechanism is quite helpful in cases of complaints as these are specified for such issues and provide a quicker solution. In case the issue isn’t resolved here, you can approach a higher authority.
  6. Know your Rights: As a borrower, you ought to be aware of your rights. You need to understand your rights under the Fair Debt Collection Practices Act (FDCPA) as a debtor. This regulation restricts how debt collectors may contact you, as well as the hours of the day and number of times they may do so. You may file a lawsuit for damages against both the debt collection company and the individual collector if the agent violates the FDCPA.

Steps To File A Complaint Against Loan Recovery Agents

Here are a few legal steps that you can take if you want to complain against the loan recovery agents in regard to harassment that you might be facing:

Filing a Complaint at a Police Station

Defaulters may complain to the police station against the bank and the recovery agency. However, defaulters have the option to speak with the magistrate if the police are unable to accept a complaint.

Filing a Civil Injunction Suit

If the police do not take any action, the borrower may file a civil court request for relief. The court has the authority to rule in favor of the borrower and to order the agent to desist from engaging in such unlawful and menacing activity. Additionally, there's a good chance the court will provide a decision that strikes a balance and benefits both sides.

Filing a Complaint at the Reserve Bank of India

The RBI has created a set of guidelines for recovery agencies in response to an increase in complaints of harassment by lenders and agencies. Therefore, the borrower can get in touch with the RBI and complain if they believe that agents or lenders have mistreated them. Guidelines violators will face severe consequences from the Reserve Bank. They could think about temporarily prohibiting the bank from using recovery agents in a specific region. If criteria are consistently broken, the RBI may consider increasing the ban's term or geographic scope.

Trespass Objection

Should recovery agents unlawfully enter the borrower's residence without authorization, a trespass complaint may be brought for the violation of an individual's rights.

Grievance for Extortion

A complaint for extortion may be brought if the recovery agents use coercion to get the money back.

File a Complaint with your Bank

The borrower may file a complaint with the bank directly if they feel that a third-party recovery agency is pestering them.

Defamation Claim

Borrowers have the right to initiate a defamation suit against the bank and the recovery agency if they are humiliated by the agent in any manner, such as by phoning their friends or family, making a disturbance at their place of employment, or embarrassing them in front of their neighbors. For detailed steps on this process, refer to our article on filing a defamation case in India..

Conclusion

To conclude, it is understandable that the loan recovery process becomes quite harassing at times, but it is crucial to be aware of our rights, so no one gets a chance to take undue advantage of yours. Depending on your subjective situation, you can choose the legal remedy that suits you. With these many options for remedies, there is a high chance that your problem will be solved soon. Consult a legal professional if needed for better, more accurate, and subjective advice as per the situation. At the same time, make sure you act like a responsible borrower, and if you have done that, there is nothing to worry about.