Many people opt for loans for sudden needs such as education, purchasing flats, or personal expenses. However, when loan repayments begin to turn tough, recovery agents start aggression towards borrowers. The article below describes the rules laid down by RBI, explains what harassment by loan recovery agents looks like, and tells you the legal steps you can undertake for your protection.

RBI Guidelines on Private Loans

The RBI has rules to protect borrowers and make loan repayment fair. These rules include:

Fair Practices for Lenders

• Clear Terms: Lenders must explain all loan terms, including interest rates and repayment schedules.
• Trained Agents: Only trained recovery agents should be hired by lenders.
• Respectful Communication: Lenders must notify borrowers before taking action, and all communication should be respectful.
• Privacy: Recovery agents must respect borrowers’ privacy and avoid shaming them publicly.

Legal Requirements

• Interest Rate Caps: The Karnataka Prohibition of Charging Exorbitant Interest Act restricts interest rates to 18% per annum.
• Accountability: All lenders maintain records related to loans and repayment.
• Grievance Redressal: Lenders have a mechanism for the submission of grievances by borrowers.

Why Do Lenders Appoint Recovery Agents?

Lenders employ recovery agents for several reasons:

• Loan Defaults: Lenders are flooded with numerous loan defaults, especially in respect of loans given without security. Recovery agents recover or collect debts.
• Limited Resources: Banks and NBFCs don’t possess the staff to take up recovery.
• Cost-Effective: Hiring agents on commission is far cheaper than full-time staff.
• Speed: Recovery agents can act faster than the legal process allows.
• NPAs Pressure: High non-performing assets (NPAs) push banks to recover debts quickly.

Agents may be handy, but a few use harassing recovery techniques, thereby raising complaints.

What Is Harassment by Loan Recovery Agents?

Harassment occurs when collectors use hostile means to try to collect debts. These include:

• Hostile Calls: Repeated calls with threats or demands that you pay.
• Unwelcome Visits: Agents appearing at your house or place of employment without warning.
• Bad Publicity: Publishing your name in a manner that has damaged your good name.
• Physical Coercion: Threats or violence meant to intimidate you.

All of these are illegal and can cause emotional damage.

How to Defend Yourself Against Harassment?

If you experience harassment, take the following 6 steps:

1. You Have Rights

RBI rules and regulations, such as the Karnataka Prohibition of Charging Exorbitant Interest Act, safeguard you against exploitation.

2. Write It All Down

• Maintain Records: Note every call/contact detail, time spent, and what was discussed.
• Collect Your Documents: Loan application agreement, payment receipts, and schedules.

3. Demand and Accept Official Correspondence in Writing

This keeps a record and saves you from the harassment.

4. Register a Complaint

In case harassment does not stop:

• Reach out to the bank/NBFC: Escalate the complaint with proof.
• Approach the Banking Ombudsman: In case unresolved, resort to the Ombudsman.
• File a complaint with RBI: Through the RBI complaint portal on unfair trade practices.
• Call Police: In case threatened or unsafe, approach the police.
• Consumer Court: File for seeking compensation under the Consumer Protection Act.

5. Seek Legal Counsel

A civil lawyer can help you and guide you through your rights to a cease-and-desist letter and legal action.

6. See Debt Options

Consult financial advisors to discuss available debt management options. They can help you create a repayment plan and let recovery agents stop contacting you.

Bonus Tips

• Record Calls: If it is permissible by law, record calls with agents. Tell them you are recording.
• Block Numbers: Use apps that block unwanted calls.
• Speak Calmly: Be professional and speak calmly. Do not engage them in arguments.

Legal Remedies Against Recovery Agents

If the recovery agents violate any laws, you can do the following:

• File for Police Report: Provide harassment evidence.
• Sue for Damages: File a case against the debt collectors or lender.
• Consumer Protection Act: File a case under the laws for unfair practices and recover damages.

How Zolvit Can Help

If you are being harassed, then Zolvit will also provide the assistance. Our law experts in the consumer rights sector will assist you:

• In knowing the relevant rights.
• File complaints with authority.
• Negotiate a fair repayment plan with lenders.
• File cases in the court of law.

Don’t let harassment overrun your life. Contact Zolvit for expert legal advice and support.

Conclusion

Harassment by loan recovery agents is stressful, but you don’t have to face it alone. Knowing your rights and using legal avenues will help you protect yourself and work toward a solution. Right help will help you regain control and gain financial stability.

FAQs Related To Loan Repayment and Harassment