Recovery agents or the collection agents are nowadays one of the worst nightmares of the common man. Most banks, financial institutions and even telecom companies employ recovery agents to collect their debts. Even though the practice of outsourcing debt collection has been around for some time, it is a recent trend that these agents use inconsiderate means like harassing, threatening, insulting etc. to recover the debts. Some institutions even employ local gundas and criminals as their recovery agents. They track us everywhere, harass us, insult us, and some even go to the extent of physical assault.
Perhaps it is a testimony to their omnipresence that currently there are ads on TV making fun of them. However, things can take an ugly turn. The Dhwanik Mukesh Shah incident, in which Dhwanik Mukesh Shah, an interior decorator from Pune, committed suicide after being harassed by the collection agents of a bank, is a perfect example for how bad the state of affairs can become.
RBI Regulations on Recovery Agents appointed by Banks
The Reserve Bank of India has prescribed some guidelines for the banks to follow while appointing a recovery agent. These Guidelines require the banks to:
- Conduct a background check on the Recovery agency. This includes pre-employment verification of the employees of the recovery agency. This is to make sure that the agency does not employ those with a criminal record.
- Inform the borrower about the appointment of the recovery agency
- Provide authorization letters to the recovery agency, which can be verified by the borrower.
- Have a mechanism through which the bank can address the grievances of the borrower regarding the recovery process.
The guidelines have specifically mentioned that Banks as principals are responsible for the acts of their agents. It also mentions that the Reserve Bank can ban the bank from engaging recovery agents, if it receives any complaints against a bank or its recovery agents violating these guidelines or adopting abusive methods.
Even though the RBI has prescribed the above guidelines, not many banks follow them. The main reasons for this are the non enforceability of the guidelines and lack of proper follow up. Of course you can always file a case with the Delhi Consumer Forum in this regard. For example, the Delhi State Consumer Commission in 2007 fined ICICI Bank Rs.50 lakh for engaging goons as its recovery agents. A compensation of Rs. 5 lakh was also given to the victim who was beaten up by them (see this).
Recovery Agents in Telecom Sector: A Consumer Judgment
The above guidelines are only for banks and financial institutions. Unfortunately, there are no prescribed guidelines for sectors such as telecom. However, the Indian judiciary has always taken a firm stand against companies engaging musclemen for recovering their debts.
Mr. Sameer Nandvani, an Advocate from Delhi, was very shocked to find out that it would cost him Rs. 2000 to disconnect his telephone connection. He had taken a CDMA telephone connection from Tata Telecom Services Ltd, with an initial cost of Rs. 1000 and a monthly charge of Rs. 199. Since the day of getting the connection, it never worked properly. The connectivity was not at all good and even the telephone set had some problems. Despite making many complaints, there was no response from the telephone company. Later the telephone company informed Sameer that his plan has been changed to another one. Because of all these problems, Sameer decided to cancel his connection.
It was only after submitting the application for cancelling his connection; Sameer was informed by the customer care that he has to pay Rs. 2000 as cancellation charges. This information was not communicated to him at the time of taking the connection. As Sameer refused to pay the cancellation fee and the bills he received after that, his telephone connection was made one sided, i.e. only incoming calls were allowed. The situation got worse when he started receiving telephone calls from the recovery agents employed by the company. These agents even went to the extent of threatening his family members. Sameer filed a complaint at the District Consumer Forum. He also registered a police complaint against the company.
The District Consumer Forum, after hearing both the parties, ordered the telecom company to pay an amount of Rs 20000 as the compensation for the mental agony and stress caused to him, in addition to an amount of Rs.10000 as the cost of litigation. The State Consumer Commission affirming the decision of the District Forum criticized the use of harsh means by the recovery agents, in the following words.
“We have also been deprecating practice of the service providers employing the recovery agents to recover the dues even if these are legal dues as no civilized society can brook such kind or method of recovery particularly in a democratic set up governed by rule of law. Every right of service provider or consumer has to be claimed or settled through due process of law and not by arrogating the powers of Court to themselves”. See the full judgement here.
So the next time a recovery agent troubles you:
- Ask for his authorization letter from the company.
- Contact the company and make sure that the agent who approached you is authorized by the company.
- Try to record all the communications you have with the agent, so that you can use it as a proof that the agent harassed you.
- File an FIR with the police against the Company and the recovery agents if you are harassed.
- File a complaint at the district consumer forum against the Company (see our No Non-sense Guide to Filing a Consumer Complaint), seeking compensation for the mental stress and agony caused (see also our Frequently Asked Questions about Consumer Complaints).
Thanks to Peter Adams, our intern from NUJS, Kolkatta for his research and drafting of this article.
Image credit: The image is taken from Bigrock.com’s advertisements currently running on TV. See the full http://www.youtube.com/watch?v=bUxBjWh9dY4 - there are some other funny ads too in this series.
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