How to Deal with a Recovery Agent?

I came across an instance in a Youtube video about how borrowers are harassed by recovery agents. A news organisation uploaded the video on their Youtube channel. Do note the media does not smell of roses and tends to sensationalize things. I have not independently verified the claims of the concerned media channel. Broadcast media has little credibility left. For all you know, this could all be cooked up. I got to know about this video from my Twitter timeline when a person I follow retweeted this video.

At the same time, this did not come as a surprise to me. From whatever little I know of banks and financial companies, they can employ such means to recover money, despite the RBI directions against this. Here’s a brief background.

A lady had taken a business loan from Bajaj Finance. The Covid-19 related lockdown affected her business. While the loan moratorium offered relief, but the relief ended on August 31. The loan EMI was due on September 2 that she could not pay. The recovery agents started chasing the lady a week later. More importantly, the recovery agent did not call as a recovery agent. He masqueraded as a policeman and threatened to put the lady behind bars if she did not pay the EMI due in a day.

There was another person, supposedly a lawyer acting on behalf of Bajaj Finance who kept calling this lady. Hence, this fake policeman and lawyer (perhaps another recovery agent) keep harassing this lady.

The news channel came to know about the lady’s plight (I don’t know how). And they called back the police constable and the lawyer. The news channel also recorded their calls and put the recording in the video.

This video has lessons for all of us. Such threatening voice can cause mental trauma. Most of us will shudder at the thought of visiting a police station. You were struggling with money and now you have to think about how to avoid being put behind bars. If you know your rights and how things work, you can avoid a lot of this mental agony.

Non-payment of loan is a civil offence (and not a criminal offence). The police is unlikely to get involved in such matters. The lender (bank or NBFCs) can send you notice or go to courts to enforce/sell security or make you pay but they can’t put you behind bars just because you have defaulted on a loan. Vijay Mallyas and Nirav Modis of the world are not being chased for defaulting on bank loans. They are being chased for indulging in fraud and siphoning off money.

How to Deal with Such Issues?

While I don’t know how exactly to deal with such issues, an option could be to note down the phone number and name of the recovery agent and write a polite email to the lender checking if the bank has appointed such a person for recovery. Do copy the email to the lender’s grievance cell too. While the banks have hundred ways to evade this question through a roundabout answer (after all, you are in default), a written enquiry puts the banks in a fix.

In this case, they are in clear violation of RBI guidelines on such recovery process. Moreover, impersonating a public servant is an offence and if found guilty, the offender can even be imprisoned (unlike a loan defaulter). It is a fraud, a much bigger offence than defaulting on the loan.

If the recovery agent is too aggressive or intimidating, you can share this with the bank over an email. Write emails. If you call, record your call with the recovery agent (even though the bank is supposed to ensure this).

There is nothing wrong in banks or financial institutions in reaching out to the borrowers to recover the dues, there is a proper way to do this. And RBI offers guidelines on such recovery process too.

Refer to Section 2.6 (Guidelines on Recovery Agents engaged by banks) of the Master Circular – Loans and Advances – Statutory and other restrictions. If you are being harassed by a recovery agent, you must go through this circular. Here are a few other circulars you must go through.

• Guidelines on Managing Risk and Code of Conduct in outsourcing of Financial services by banks (November 3, 2006). Search for “Recovery Agents”
• Master Circular on Credit Card Operations of banks (July 2, 2007). Search for “Recovery Agents”
• Guidelines on Fair Practices code for Lenders (May 5, 2003). Search for “Recovery”

In this case, none of the processes as specified by RBI were followed.

How to Deal with Recovery Agents?

My insights are theoretical or bookish in this matter. I have never faced a recovery agent in my life. I found this excellent infographic from a Livemint article on How to face Recovery agents.

Some great points from the infographic.

• Ask recovery agents to show their identity card. Note down their name. If they call, note down their phone number too.
• Don’t evade recovery agents. Let them know that you are willing to work towards a solution.
• The recovery agents (or their proxies) themselves have targets.
• Don’t lose temper while dealing with a recovery agent. He is just doing his work.
• Don’t tolerate intimidating behaviour or abuse. Record conversation if possible in such cases. Report such behaviour to the bank and RBI. RBI can impose penalty for violation of recovery guidelines. In case of physical abuse, you can report to the police.