Loan defaulter, a common term nowadays as taking loan has become convenient. Easy and quick loan disbursement has made it common among people to take multiple loans without a smart repayment plan. Unfortunately, this brings them to a state where they cannot repay the EMIs on time and are hence categorized as loan defaulters. The assets owned by the loan defaulters are taken as NPA (Non-Performing Asset) and hence prepared for auction to recover the bank’s dues.
Auctioning is an option if you have taken a secured loan and your property documents are kept as collateral. However, in the case of an unsecured loan, it becomes tough for the banks to recover their amount, and hence they hire third-party recovery agents to recover the amount.
RBI has already made multiple guidelines to protect the loan defaulters from being harassed or humiliated. However, recovery agents use various means to threaten the defaulters and recover the pending dues. One such incident was made in Hyderabad.
Borrower was Branded as a Rapist
On the 22nd of February, an FIR was registered by Hyderabad police, where the recovery agents of an app-based financial company portrayed a man as a rapist so that he could repay the loan and avoid further harassment.
The report states that “They morphed my photo and added content saying that I had raped a five-year-old girl, besides brutally assaulting the minor. They also said that she is now in ICU. My morphed picture with this content was shared on WhatsApp with members of my family and friends,” the complainant told Hyderabad police.
This is a rare case for the police officers; a similar case was later informed about another person being harassed by recovery agents who morphed his photographs, added pornographic images, and threatened to share them with his contacts a fortnight ago. He cleared the loan to safeguard his dignity and reputation.
Shaming in Front of Known
In 2020, numerous cases came into the limelight where the recovery agents forcefully took control of the contact list of the borrower and shamed them before friends and family members. Their only motive is to force the people to return the loan amount and avoid further humiliation.
Unfortunately, Telangana reported six suicide cases due to harassment by the recovery agents. This compelled the police to get into the complaints and found numerous frauds discrepancies resulting in multiple arrests.
Another man from Hyderabad reported a case in the central crime station about a loan he took two years back and repaid it. Still, he is getting threatening calls from the recovery agents. This makes a clear picture that the case of harassment and threatening by the recovery agents isn’t ended. Instead, it is increasing with each passing day.
The DCP, CCS, Gajarao Bhupal, said, “We need to investigate the case on where they are calling from. However, complaints about harassment from loan apps have come to our notice.“
As a borrower or loan defaulter, you have many rights that you must know before getting harassed and being treated as a criminal.
Right to Prior Notice: No bank or loan application can list you as a criminal. Instead, they are compelled to inform you about your missed repayments with the penalties. All the actions for loan recovery are done under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act. The loan apps can take action only if the borrower’s account is marked as NPA.
Right to Get Fair Value: If you fail to repay the dues within 60-days, your property will be marked for auction. However, bank/ loan companies are bound to put the notice including complete property details, including its estimated value.
If you aren’t satisfied with the property value, you can file your objection. Hence, you can find a buyer for the property offering higher value than the bank.
Realize Balance Proceeds: If you are marked as a loan defaulter, and your property/asset is prepared for auction, this doesn’t mean your involvement is over. You have the right to stay involved in the entire process starting from bank repossession to its sale. You are the absolute owner of the property, and hence you must get the additional property amount after dues deduction.
Right to be Heard: Not all borrowers intentionally skip repaying the loan EMIs. Many borrowers face a financial crisis that causes such a scenario. If you face a monetary problem, you have the right to reach the respective officer to negotiate and find a better option than auctioning your property.
Right to get Human Treatment: Above all, you are a human, and hence you deserve human treatment by the recovery agents. You shouldn’t be treated as a criminal. No bank or loan application must force you to repay the loan and threaten you in any way.
If you feel harassed by the bank agent, you have the right to complain about him. The respective bank is liable to redress your grievance within 30 days.
Cases of harassment have become common in the country. Not all borrowers know that some legal rights are available to report against the recovery agent and shelter their family from humiliation or harassment.
File a Police Complaint: Report about a recovery agent is filing a police complaint. You should mention the bank and the recovery agent details with the police officer while reporting your complaint.
Injunction Suit Against Bank and Agent: You can file a civil injunction suit against the recovery agent and the bank; with an ad-interim relief.
File Objection with RBI: You can file a legal complaint against the bank and the recovery agent if you feel humiliated by them.
Defamation Suit: As mentioned earlier, a Hyderabad resident took a loan two years ago and repaid it. Still, he is getting calls from the recovery agent talking rudely to repay the dues. You can file a defamation suit against the bank/loan application if you are one such borrower. A defamation suit can be filed if you are being harassed or pressured based on incorrect data.
Trespass Objection: You can file a trespass complaint to ensure the recovery agent won’t visit your home without prior consent.
Extortion Grievance: You can file the extortion case against the recovery agent if he is forcing you for loan recovery.
Complaint to the Bank: Nowadays, recovery agents are not hired by third-party agents. Instead, most banks hire in-house managers that serve as recovery agents. However, private loan apps and companies still hire third-party recovery agents that humiliate the borrowers for loan recovery. If you witness any such incident, you can file a complaint with the company or bank. They are liable to respond to your complaint within 30 days.
Banking Ombudsman: You can also complain to the bank ombudsman, who will take action against the recovery agent and the loan app/bank. For all such incidents, RBI is responsible for addressing such grievances.
You should ensure repaying the EMIs on time. However, if you skip repaying two consecutive EMIs, the lender will send you reminders. Remember, you won’t be considered a defaulter during the initial months.
Most loan borrowers think that you will be sued with criminal charges if you fail to repay the loan on time. However, you must know that defaulting on a loan is a civil dispute. If you cannot pay EMIs on time, regardless of any reason, it’s important to find a practical option. Some of them are listed below:
Utilize Your Emergency Fund: Most financial advisors recommend having an emergency fund to tackle your bad time. You can use the emergency fund to repay the dues and streamline your budget.
Sell Your Assets: If you want to avoid unexpected visits to loan recovery agents, it’s better to sell your asset and compensate for your delayed loans. Use the required amount to clear loan dues and use leftover amounts in various investment options.
Negotiate with the Lender: If you have a good repayment record and hence build a relationship with the bank/lenders, you can ask them for help. Banks can help you with a few options that include:
- Deferring Payment: Lenders can temporarily pause your EMIs based on your credit score and previous payment history.
- EMI Reduction: If possible, banks can reduce your EMI amount and increase its tenure to give relief. However, it depends upon banks/lenders to accept or reject this request.
- One Time Settlement: Most banks have the option for a one-time settlement. With this option, you are allowed to pay a large sum in a single go and clear the dues. You should note that a one-time settlement reduces your credit score.
So, this is all you should know as a borrower. There are different types of loans available. Secured loans are available with low-interest rates, while unsecured loans are available with higher interest rates. Recovering the loan amount from a secured loan is easy as the property is repossessed by the bank and auctioned to get the loan dues. However, such harassment and humiliation cases occur in unsecured loans.