Loan Recovery Agents, are those who work for banks to recover debts owed from customers and the organizations they owe them. These agents work on a small percentage of the total amount owed and refunded from clients. Agents are generally third parties that are not part of the main deal. In some cases, the recovery agent can also be one of the parties directly involved in the transaction, but for the most part they are third parties.
Agents interested in reclaiming the loan may seem to be a small problem but there are cases where people have committed suicide or suffered psychological trauma due to the unofficial behavior of the agents. Agents harass customers through their activities. Some notable acts committed by agents on a regular basis such as frequent calling or arriving at clients residence regularly, sending obscene messages either via mobile phone or through social media, calling or communicating with neighbors to defame or even threaten relatives, will also perform activities like humiliation in public places And reach the heads of customers to the harassment.
But all these activities if conducted on an official basis, will not lead to harassment. If the agent sends a message, not frequently but does provide an update regularly, like a reminder, or even call a reminder, it won’t lead to harassment. Moreover, the Indian courts have been strict about the informal position of recovery agents as the courts have noted that strong arm tactics for recovering funds are illegal and fair treatment must be resorted to by law. However, these activities are still freely carried out by customers. The main question is what are all the remedies available in case the loan recovery agent takes an unauthorized method to harass clients. Let’s delve into the same thing.
If the customer is harassed by the bank or the recovery agent, the customer can turn to the police station and can file a complaint. This should be an essential step before taking more drastic action. In the event that there is no exemption from the police or they do not file a complaint, the client can even go to the civil court and can seek redress. In this case the court can rule in favor of the client and can order the agent not to resort to unauthorized and illegal behaviour. There are potential opportunities for the court to give relief to clients and provide a middle path that can be beneficial to both parties.
The customer can also file a complaint with the Reserve Bank of India (RBI) where RBI can take strict measures to ensure that the loan recovery agent does not engage in illegal behaviour. As per the Circular on Loans and Advances issued by the Reserve Bank of India, it has been meticulously ascertained as to the specific considerations which the bank and the loan recovery agent have to follow. Pursuant to Clause 2.5.4 of the circular, it states that complaints received by the Reserve Bank regarding the violation of the Guidelines and the adoption of abusive practices followed by Bank Recovery Agents will be seriously considered. The Reserve Bank may consider a ban on the Bank from engaging redemption agents in a particular area, whether judicial or functional, for a limited period. In the event of continued violation of the guidelines, the Reserve Bank may consider extending the period of the embargo or exclusion zone. Similar supervisory action may be attracted when the High Courts or the Supreme Court issues restrictions or imposes sanctions on any bank or its directors/officers/agents with respect to the policy, practices and procedures relating to the redemption process.
Not only with the Reserve Bank of India, but the customer can also file a complaint with the bank itself. In general, there are potential chances that the bank will take optimum care when there is a complaint against its agents and can ask to opt for legal behaviour. However, one can also file a defamation or trespass suit in court against the bank or agent.
With the increasing cases of humiliation and harassment by agents, it is essential to understand the remedies available to clients. It is also advisable to take help from an experienced attorney if the illegal activity continues.
(The writer is an associate of Khurana & Khurana Advocates and Intellectual Property Advocate, a leading intellectual property and commercial law firm in India with an international presence in various countries.)