The Rs 1-crore penalty imposed by the Reserve Bank of India (RBI) on HDFC Bank for violating directions related to the engagement of recovery agents, among others, has once again put the spotlight on the high-handed tactics that borrowers have to often put up with.
In this instance, the banking regulator found that HDFC Bank's recovery agents had contacted customers beyond the stipulated hours, specifically after 7 pm and before 7 am. The penalty is a reminder that banks must adhere to these guidelines and respect customers' privacy and boundaries, even if they have defaulted on their loans or have delayed EMI payments.
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.
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.
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Defaulted on a loan? It’s not the end of the world
i. Approach your lending bank on default of the loan
Take control of your debt management by keeping your bank informed about your current financial situation. This will serve as proof of your financial circumstances and help recovery agents understand your situation. It will also demonstrate your commitment to resolving the outstanding debt issue.
By being transparent and proactive, you can avoid miscommunication and potential harassment. Show the bank and recovery agents that you're taking steps to address your debt.
ii. Apply for restructuring of the loan
You have the option to restructure your loan with your bank. This can provide a more manageable and flexible repayment plan, helping you avoid default and its consequences. You can continue to repay your loan with a revised schedule.
Before accepting a restructured proposal, ensure you review the terms and conditions, understand the revised repayment schedule and interest rates and confirm the proposal meets your financial needs and goals.
By restructuring your loan, you can regain control of your finances and avoid further complications.
iii. One-time settlement
If you're unable to pay any amount to the bank or NBFC, loan settlement might be an option. This involves making a one-time payment, which is less than the total amount due, with a certain percentage of the principal and interest amount being waived off by the lender.
However, consider the consequences—your credit report will reflect that the loan was not fully repaid. The settlement will be noted as a "settlement" or "partial payment" in your credit report. This can negatively impact your credit score and affect future borrowing.
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