A senior colleague of mine Rajesh Kumar told me that he was being hounded by a collection agency representing a certain bank. No, he had not defaulted on any loan or credit card. In fact his credit record was quite impeccable.
So why was the collection agency hounding him?
It seems that an ex-colleague of ours, Pratap had defaulted on his credit card dues and was consistently avoiding the calls from the credit collection agency. The said collection agency had turned smarter and more Internet savvy and had discovered that Pratap used to report to Rajesh Kumar (probably thru www.linkedin.com) and were somehow able to get Rajesh’s mobile number. They started hounding Rajesh on the specious plea that Pratap had told them that he (Pratap) had lent on the money to him (Rajesh) and hence they were following up with Rajesh to get their money back.
As Rajesh had not done any such thing, he chose to tele conference Pratap with the collection agency person. Still calls from the collection agency continued. Since Rajesh had nothing to do with Pratap, he ignored the calls till they became pesky enough to be a nuisance. This is when he approached me for guidance.
Co-incidentally on the same day I saw a newspaper headline that said that India’s largest bank was all set to publish photographs of defaulters in newspapers and their own branches. This was an attempt to name and shame the “willful” defaulters into paying their over dues. In my opinion publishing of defaulters photo in newspapers is against the BCSBI code which requires that the bank respect the privacy of the borrower.
This co-incidental overlapping of two separate incidents regarding collection practices by banks set me thinking. Were we returning to the Halcyon days of 2006-08 when collection agencies appointed by the banks ran amok and severely abused the entire system? Consumer complaints came pouring in and some borrowers even committed suicides following the harassment by the collection agencies. But this activated the regulator and stringent guidelines were put in place by RBI.
In fact as per those guidelines, the practices followed by the collection agency with even Pratap were illegal. They were calling him at odd hours, visiting his house at odd hours, calling him from an unregistered number, were using abusive and threatening language and were refusing to identify themselves or show him their credentials from the bank on the one occasion that they did manage to meet Pratap.
So Pratap would be well within his rights to complain to the nodal officer of the bank and if the harassment still continued a simple email complaint to the banking ombudsman would solve the issue for him. RBI’s stringent guidelines include a warning that banks are responsible for the actions of the collection agency in case or complaints RBI can, apart from other penal actions, also disallow the bank from appointing a recovery agency at all.
Of course Rajesh’s problem was comparatively easier to handle since he had no connection with the borrowing at all. Rajesh just sent off an email to the nodal officer of the bank and the calls stopped immediately thereafter.
The spate of collection related complaints have died down since the crackdown and the new guidelines are more or less being followed (or at least they get followed the moment the agency realizes that the borrower knows the law). Of course there also has been a dramatic decline in retail loan defaults itself due to the emergence of the credit Bureau which records consumer defaults. A consumer who defaults finds it next to impossible to get another loan or credit card from the formal lending system.
Hopefully the reduction in defaults will ensure that extra legal collection methods will cease altogether!
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