Loan recovery agents harassing borrowers has become a common story in the media, but many people are unaware that borrowers also have legal rights in case of loan defaults.
Nowadays, loan approvals have become comparatively easier as banks and non-bank lenders constantly look for opportunities to widen their customer base. Over the years, the RBI has also relaxed lending norms for these financial institutions.
RBI guidelines on protecting loan borrowers against harassment by recovery agents
The easy availability of loans, however, has led to a problem — the number of defaults has grown significantly, prompting the RBI to frame new guidelines regarding lending for both banks and customers. In this article, we will delve into various remedies available for loan borrowers in case of loan defaults and possible harassment by recovery agents appointed by lenders. The Reserve Bank has provided various legal rights to protect loan defaulters from undue harassment and abusive behaviour by financial institutions.
5 best credit cards for airport lounge access in India for July 2024
OPS-like guaranteed pension in NPS: Central govt employees may get 50% of last-drawn salary as pension – Details
Best Fixed Deposits offering up to 9% return – Check the latest interest rates
8th Pay Commission: What will be minimum and maximum salary of govt employees? Allowances, other benefits to be revised
A borrower becoming a defaulter may have a genuine problem due to job loss or other financial contingencies, which the Reserve Bank of India understands. Consequently, the RBI has issued guidelines to safeguard consumers’ interests and prevent incidents of harassment by banks and other financial institutions.
Also read: Unable to pay your loan EMIs? know these legal protections you have as a borrower
The RBI has taken note of the rising incidents of harassment by recovery agents over the years. In particular, post-COVID, financial institutions were under severe stress, leading recovery agents to resort to harsh treatment and practices towards customers while trying to recover loans. In this article, Kundan Shahi, Founder & CEO of LegalPay, shares his insights on the various legal rights consumers have in case of loan default and harassment by loan recovery agents.
What proactive measures can borrowers take to prevent or mitigate harassment by loan recovery agents?
Keep Records:
- Record all calls, emails, and messages from the recovery agent to show proof of harassment.
- Present this evidence to your loan officer or lender.
Report to RBI:
- If harassment continues, write or email the RBI with all the details.
RBI’s Guidelines:
- RBI’s Circular for Loans and Advances strictly addresses complaints about guideline violations and abusive practices by recovery agents.
- RBI can ban banks from using recovery agents in certain areas for violations.
- For repeated violations, the RBI may extend the ban. They take genuine complaints seriously.
Defamation and Trespassing:
- If the recovery agent defames you by contacting friends, family, or causing trouble at your workplace or neighborhood, you can file a defamation lawsuit against the bank and the agent.
- If they enter your property without permission, you can sue for trespassing.
Immediate Help:
- Go to the police station and file a complaint as your first step before taking more drastic measures.
- If the police do not help or register your complaint, you can go to court for interim relief against the bank.
