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What borrowers should know about their rights against loan recovery agents

People who fail to repay their loans are not criminals and they can't be harassed

Topics
loan recovery | RBI | NBFCs

Sanjay Kumar Singh  |  New Delhi 



Photo: Shutterstock
Customers must read their loan agreements carefully. (Photo: Shutterstock)

You would have read or heard about the incident in Hazaribag district of Jharkhand in which a 27-year-old pregnant woman, a farmer’s daughter, was crushed to death under a tractor by a recovery agent. This happened as the agent tried to forcibly seize the vehicle on account of non-payment of dues.

With an estimated 1.5 million recovery agents belonging to around 75,000 agencies chasing borrowers across the country, incidents of harassment and intimidation are commonplace. “After Covid, once the moratorium was lifted, banks and non-banking financial companies (NBFCs) were under stress, and they in turn passed on the stress to the recovery agencies and agents. The usage of non-qualified agents is another reason behind such incidents,” says Nitin Purswani, chief executive officer and co-founder, Medius, an artificial intelligence-driven debt collection solution for lenders.

In this age when people borrow to meet a variety of needs, it is important to know how to respond to the intimidation tactics of recovery agents.

Typical malpractices

agents resort to a variety of tactics that have been declared illegal. One, they often call the borrower’s parents, relatives, colleagues, neighbours, and sometimes even the employer, to embarrass him. “They use social stigma as a means of coercion,” says Madan Srinivasan, co-founder, Creditas Solutions, a digital debt collection agency.

Two, they inundate the borrower with calls and messages. They may use abusive language. agents also pay borrowers surprise visits at non-standard hours, such as early in the morning or late at night. At times, they even resort to physical violence.

Three, recovery agents at times impersonate others. If the borrower is not meeting them, they pretend to be calling from a court. They say that your case is underway, and if you don’t show up you could go to jail.

“The whole purpose is to harass customers. There is a belief that such harassment and pressure tactics will lead to prioritisation. The borrower will find some means or the other to repay the loan,” says Arun Ramamurthy, director, Andromeda sales and distribution, and an expert on digital lending.

Agents must adhere to code

Just because a borrower has defaulted doesn’t give a recovery agent the right to misbehave with him. “Borrowers need to know their rights. Most borrowers, unfortunately, don’t,” says Purswani.

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First Published: Fri, September 23 2022. 19:37 IST

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