Lenders' Recovery Agents - Know Your Rights

Recovery agents resort to various tactics to collect the debt owed by borrowers to banks and other financial institutions, and some methods can be humiliating and intimidating as well. The modes could range from, send recovery letters threatening legal action, or visit customers at the latter's residences. There have also been incidents when agents have physically intimidated borrowers and the latter, out of sheer humiliation, committed suicide.

Legal contract:

In the first place, a borrower must understand clearly whether the loan agreement he is signing is a legal contract. In that case, if he happens to default, the problem can be resolved through legal means. A majority of borrowers are not aware that a lender does not have any right to use strong arm tactics against defaulters for recovering debts. A borrower also should not try to avoid meeting a recovery agent as doing so could complicate matters further.

RBI guidelines:

The Reserve Bank of India (RBI) has issued strict guidelines to protect borrowers and to stop unethical practices that recovery agents are often known to indulge in. Firstly, a bank should provide details of the recovery agent to the borrower while the agent should also carry in person the lender's authorization letter and an identity card. Customers should be contacted only on the telephone numbers provided and calls or personal visits should be made at appropriate hours only.

Customers should not be humiliated publicly and the use of abusive language is strictly prohibited. Further, recovery agents must have completed the Indian Institute of Banking and Finance (IIBF) course on behavioral skills.

Borrowers' rights:

If a recovery agent does not adhere to the guidelines but tries to harass a borrower, the latter can lodge a complaint with the police and also to the Banking Ombudsman. There are also several consumer action groups and forums which can help a borrower and solve his disputes.

How to avoid recovery agents:

The best method to do this would be by following the golden rule: never borrow more than you can comfortably repay.

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