Rs 1 cr penalty on HDFC Bank: How to protect yourself from recovery agents

The Reserve Bank of India (RBI) has imposed a Rs 1 crore penalty on HDFC Bank for violating guidelines related to the engagement of recovery agents. The bank's recovery agents were found to have contacted customers outside of stipulated hours, disrupting their privacy and causing inconvenience.

HDFC Bank was found to have violated RBI directives related to the ‘Recovery Agent as well as other areas, such as ‘Interest Rate on Deposits’ and ‘Customer Service in Banks.’ The central bank’s inspection, which assessed the financial  position of the bank as of March 31, 2022, highlighted that HDFC Bank did not adhere to guidelines restricting customer contact by recovery agents outside the permissible hours of 7 am to 7 pm.

The incident, in which HDFC Bank's recovery agents had contacted customers beyond stipulated hours, specifically after 7 pm and before 7 am, highlights the issue of aggressive recovery tactics employed by some banks, which can lead to harassment and distress for borrowers. The RBI's serves as a reminder to banks that they must maintain ethical and responsible practices when dealing with borrowers, especially those who may be facing financial difficulties.

Against this backdrop, it's essential to know how to protect yourself from possible harassment from recovery agents.

Right to check the identity

As fraud cases rise, borrowers have the right to safeguard themselves against impostors posing as recovery agents. Before engaging in any conversation about pending dues, ensure you ask for the recovery agent's ID card, verify the ID card is issued by the bank or NBFC, check that the agent's details match the ID card and confirm the agent's authority to collect dues.

Right to privacy

Recovery agents are bound by law to maintain confidentiality when dealing with your debt issues. They cannot share information about your debt with others and discuss your debt in public or with third parties.

Regulated entities include banks, regional rural banks, payment and small finance banks, NBFCs, housing finance companies, and cooperative banks. The RBI’s draft norms on “Managing Risks and Code of Conduct in Outsourcing of Financial Services” stress that these entities and their recovery agents should not intimidate or harass borrowers, either verbally or physically, during debt collection. This includes actions like public humiliation or invading the borrower’s privacy, such as sending inappropriate messages or making threatening calls. 

 REs and their recovery agents are not allowed to contact borrowers or guarantors before 8:00 a.m. or after 7:00 p.m. when collecting overdue loans.

If you witness a recovery agent violating this right, then file a complaint with the concerned bank or NBFC. You can also seek legal action against the agent.

Right to humane treatment

Recovery agents are required to follow a strict code of conduct when dealing with borrowers. They must be decent and civilised in their approach, respect your personal space and contact you between 7 am and 7 pm.

If a recovery agent violates these guidelines, you have the right to take legal action against them. Support your claim with valid proof, such as records of unsolicited calls or messages, witness statements and evidence of harassment or threats.

If you experience harassment from recovery agents, you can take the following steps:

• File a Police Complaint: Report the incident to the local police under Section 506 of the Indian Penal Code, which addresses punishment for intimidation.
• Seek Injunction: File a civil suit in court seeking an injunction to prevent further harassment.
• Complaint to RBI Ombudsman: Lodge a complaint with the RBI ombudsman if the bank fails to address your concerns.
• Consumer Body: If the police refuse to file an FIR, consider filing a complaint with a consumer body.
• Legal Representation: Consult a lawyer for advice on the appropriate legal course of action.

• Document Everything: Keep a record of all interactions with recovery agents, including dates, times, and content of communication.
• Negotiate with the Bank: Try to work out a repayment plan with the bank to avoid further escalation.

Understanding Recovery Agent Tactics:

Untraceable Communication: Recovery agents may use untraceable phone numbers or WhatsApp messages to avoid identification.
 

Denial of Affiliation: Lenders and recovery agencies may deny the existence of the representative who is harassing you.
 

Steps to Take:

• Report to Cybercrime Division: If you encounter a recovery agent using untraceable communication or denying their affiliation, report the incident to the local police's cybercrime division.
• Legal Notices and Injunctions: Consider issuing legal notices to the recovery agents and seeking an injunction to prevent further harassment.
• Consult a Lawyer: While legal action may be time-consuming and expensive, consulting a lawyer can provide valuable advice and guidance.
• Contact Bank's Nodal Officer: If legal action seems impractical, reach out to the bank's nodal officer to discuss your situation and explore negotiation options.