Buying any type of loan has become easy and convenient. If you have a good credit score, most banks are ready to give you a hassle-free loan. That's why many people take loans even when there is no such need. This puts an additional burden and hence starts creating financial strain on your monthly planning. Some of the borrowers end up skipping EMIs that take them into the defaulter's category.
Banks allot a recovery agent to communicate with the borrowers, but many times borrowers witness the case of oppressive and misconduct by the agents. As a borrower, you can be a defaulter; but this doesn't mean you are a criminal. Instead, you have numerous rights as a defaulter; getting fair and human-like treatment is one among them.
There are numerous cases across the country where recovery agents/officers threatened the defaulters. Most banks prefer hiring third-party recovery agents. However, banks nowadays have inhouse recovery agents that take care of the dues and communicate with the borrower client/organization.
If you are a loan defaulter and have faced harassment, you have the right to take adequate action against the agent. Before that, it's important to understand what's considered harassment.
If you face any of the below-given scenarios with the recovery agent, it will be considered harassment.
It's essential to note that some scenarios aren't considered harassment. Below are the scenarios.
Now, if you feel harassed and are looking for a remedy, this content will educate you about all the possible rights you can adopt. RBI has made numerous rules to ensure the privacy and reputation safety of the borrower. Moreover, the RBI has introduced multiple rules to handle recovery agents.
Legal Remedy Against Recovery Agent
File a Police Complaint: If you are harassed and look forward to legal aid, you can file a police complaint immediately. You should clearly mention the bank and the recovery office for humiliating behavior. If the police refuse to file your complaint, you can reach the magistrate.
Injunction Suit Against Bank and Agent: You can file a civil injunction suit with an ad-interim relief against the bank and respective agent. With this, you can guarantee that the recovery agent won't visit your home to settle the dues.
File Objection with RBI: As mentioned earlier, RBI has already introduced certain norms to help the borrowers from harassment and humiliation in the case of defaulters. So, if you feel uncomfortable with the recovery agent, you can contact the RBI and file a legal complaint.
Defamation Suit: If the recovery agent is putting pressure based on incorrect data that has harmed your CIBIL score also, you can file a defamation case against the bank and the recovery organization.
Trespass Objection: A trespass complaint can be filed if your (loan defaulter) individual rights are compromised. If the recovery agent visits your home without your consent, you can file a trespass complaint about disrespecting your privacy.
Extortion Grievance: You can file the extortion case against the recovery agent if he forcefully recovered the money.
Complaint to the Bank: Nowadays, every bank has a complaint department. You can reach the complaint department and communicate with them about your matter. After recording your complaint, you need to wait for 30 days to get the best possible answer.
Banking Ombudsman: There are cases when the bank doesn't entertain your issue within the specified timeframe. In such cases, a banking ombudsman can be approached. The ombudsman should decide and settle the issue between the bank and the client. RBI is responsible for addressing such grievances.
These are the rights you can opt for in case of harassment from the recovery agent. However, some rights are given to the Banks and NBFC to deal with credit recovery. Below are the rights given to Banks and NBFCs.
Original Application (OA): Banks start with using the Original Application to the debt recovery against the borrower.
SARFAESI ACT,2002: Lenders have rights to implement Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI ACT,2002). This allows the lenders (Banks or NBFCs) to auction the borrower's assets to recover the debt. However, this condition is only applied once the NPA loan amount surpasses one lakh and the credit loan amount is more than 20% of the principal and interest.
General Laws: There are general laws like the Law of Contract, Transfer of Property Act, Specific Relief Act, Specific Performance, and more that are applicable on all transactions depending upon the nature of the transaction.
File Money Suit: The banks can file an ordinary money suit against the defaulting borrowers to get the pending amount.
The Reserve Bank of India (RBI) has made rules under the Asset Reconstruction Companies (ARCs) that help secure borrowers' rights even if they are categorized as a defaulter. The RBI ensures recovery agents maintain a cordial relationship with the borrowers and hence provide various options for complaint redressal. RBI ensures the borrower doesn't face humiliation or harassment from any bank or recovery agent with a simple yet straightforward mechanism.
Now, it's always suggested to stay away from being a loan defaulter and become a victim of such incidents. The best way is to follow below points given to retaining a healthy relationship with the bank.
Find a Low-Interest Rate Option: If you are already running multiple loans and have different interest rates, there are chances of getting financial issues when managing them altogether. The best way to tackle such an issue and avoid any financial crisis is debt consolidation. Start searching for low-interest rate loans to help you close all other loans and bring your finances under one umbrella. Taking a single loan and clearing others will help you manage it conveniently.
Prepare Your Budget: Budgeting your existing loan and expenses is always appreciated if you want to stay out of the financial crisis and maintain timely repayments of all your loans. Start with creating the list of all necessary expenses. It must include the grocery EMIs that you can't skip anyhow. Alongside necessary expenses, create the list of WANTS that may consist of your upcoming trip, party, etc.
Budging is always recommended to retain a financial position and continue repaying your dues on time without skipping any installment.
Inform the Lender: Even if you have a strong budget, you might face an unexpected financial burden that affects your installments, and hence you fall short of funds. If you fail to repay the installment on time due to adverse circumstances, it's better to convey the same to the lender and request to pause the EMIs for a few months. Most banks (lenders) allow you to halt your EMIs for a few months. However, this comes with additional changes that are added to your EMI once you start repayment. Informing the lenders is better to become a loan defaulter and negotiate later for the clearance.
Lower Your EMI: Many borrowers take multiple loans that put the extra burden and cause mismanagement in the monthly budget. If you struggle with high EMI deductions, lower your EMI and increase its duration. It will help you manage the monthly income smartly without facing financial problems and getting a penalty for skipped repayments.
Liquidate Your Investment: If nothing works for you and the circumstances don't allow you to manage regular repayments, find your emergency fund and use it to continue repaying the dues on time. Most people maintain an emergency fund that can be used in an emergency. You can use the emergency fund or other investment to compensate your existing EMIs and protect yourself from penalties.
These tips will definitely help you maintain regular payment of the dues and safeguard you from being a loan defaulter. However, if you, unfortunately, become a loan defaulter, stay aware of your rights and take action against any harassment or humiliating case.