Agents bothering for loan recovery might seem to be a small issue but there are cases where people have committed suicide or suffered mental trauma due to the informal conduct of the agents.
With the easier process for loan sanctions, consumers are taking loans for their personal and professional works. But on the contrary, it has been seen that a large number of consumers are not able to repay their debt due to various circumstances. During the pandemic, when the businesses were hit coupled with an economic slowdown, there has been a huge crisis for repayment of debt resulting in multiple litigation and court-ordered action. Cases concerning illegal conduct for the recovery of the pending dues by the loan recovery agents were recorded. Cruel conducts were majorly recorded on senior citizens, poor, and marginalized where police actions were taken against agents.
The loan recovery agent, are those who work for banks to recover the due debts from clients and organizations who owe them. These agents work on a small percentage of the total amount owed and recovered from the clients. The agents are generally third parties who are not a part of the main deal. In some cases, the recovery agent can also be one of the parties directly involved in the deal, but majorly they are the third parties.
Agents bothering for loan recovery might seem to be a small issue but there are cases where people have committed suicide or suffered mental trauma due to the informal conduct of the agents. The agents harass the clients by their activities. Some of the prominent acts which are regularly committed by the agents are like calling frequently or arriving at the residence of the clients regularly, sending obscene messages either on mobile or through social media, calling or reaching out to neighbours to defame or even threaten relatives, etc. Activities such as humiliating in public, reaching out to clients’ bosses will also result in harassment.
But all such activities if done on a formal basis, will not result in harassment. If the agent sends a message, not frequently but provide an update regularly, like a reminder, or even calling for a reminder, will not result in harassment. Moreover, Indian Courts have been strict on the informal attitude of recovery agents where courts have observed that strong-arm tactics for recovering money are unlawful and authorized fair treatment of law must be resorted. Nevertheless, such activities are still resorted by the agents freely. The major question is what all remedies are available in case a loan recovery agent takes up an unauthorized way to harass the clients. Let us delve into the same.
If the client is harassed by the bank or the recovery agent, then the client can resort to the police station and can file a complaint. This must be a primary move before taking more stringent action. In case, there is no relief from the police or they do not file the complaint, then the client can even move to the civil court and can plead for relief. The court, in this case, can rule in favour of the client and can order the agent not to resort to unauthorized and illegal conduct. There are probable chances that the court grants relief to the clients and provides a middle path that can be beneficial for both parties.
The client can also file a complaint at the Reserve Bank of India (RBI) where RBI can take strict measures for ensuring that the loan recovery agent should not follow illegal conduct. As per the Circular for Loans and Advances issued by RBI, it has strictly ascertained specific considerations which the bank and the loan recovery agent must follow. As per para 2.5.4 of the circular, it states that the complaints received by Reserve Bank regarding violation of the guidelines and adoption of abusive practices followed by banks’ recovery agents would be viewed seriously. Reserve Bank may consider imposing a ban on a bank from engaging recovery agents in a particular area, either jurisdictional or functional, for a limited period. In case of persistent breach of guidelines, Reserve Bank may consider extending the period of ban or the area of ban. Similar supervisory action could be attracted when the High Courts or the Supreme Court pass strictures or impose penalties against any bank or its Directors/ Officers/ agents with regard to policy, practice, and procedure related to the recovery process.
Not only with the RBI, but the client can also complain to the bank itself. Generally, there are probable chances that the bank takes optimum care when there is a complaint against their agents and can ask for opting of legal conduct. Nevertheless, one can also file defamation or a trespass suit in court against the bank or the agent.
With the increasing cases of humiliation and harassment by the agents, it is imperative to understand the remedies available to the clients. It is also advised to take help from an experienced attorney if the illegal activity continues.
(The writer is an Associate with Khurana & Khurana Advocates and IP Attorneys, a leading IP and Commercial law firm in India with presence internationally across countries.)