Bank harassment is a severe problem that affects a lot of people all around the world. It happens when banks or their agents use forceful, immoral, or unlawful methods to handle accounts, collect debt, or enforce regulations. The purpose of this article is to provide light on the characteristics of bank harassment, its effects on specific people, and the actions that can be taken to stop it.
What Constitute Bank Harassment
Harassment by bank can be done in various forms either by hiring an agent to commit any of the following, it could be viewed as harassment to recover the money owed. These actions include:
- Excessive Communication:reaching people multiple times each day, or promptly in the first part of the day or the late evening.
- Threatening Behaviour:Using threats of legal action, arrest, or physical harm to intimidate customers.
- Public Disclosure:Sharing private financial information with third parties without consent.
- Misrepresentation:giving misleading information regarding indebtedness or the repercussions of not making payments.
The Impact of Bank Harassment
Bank harassment can have serious consequences for one’s mental and financial health. Typical outcomes consist of:
- Emotional Distress: Constant stress-related anxiety, sadness, and other mental health problems.
- Financial Strain: Unauthorized expenses or unfair charges accruing over time may make things worse financially.
- Damage to Reputation: Both personal and professional reputations can be harmed by the public revelation of financial difficulties.
What isn’t considered harassing by a lender?
Not every action taken by a lender qualifies as harassment. It is allowed for landlords to recover the money that tenants owe them. Among them are:
- sending updates and demands for installment
- contacting the customer’s home with updates and demands for payments,
provided that this occurs at a reasonable time,
- filing a court motion.
In a judgment (Smart Security Secret Service Agency vs State Bank of India) the High Court of Kerala decided that solid arm strategies to recover credits by Banks and other Financial Institutions are unlawful. Expressing that the use of solid arm strategies was unlawful, deceptive and against the insurance of public interest, notwithstanding being against the general approach, the High Court guided financial organizations to adhere to the fair treatment of law in an authorized way.
Likewise, this judgment was sent to the Governor of the Reserve Bank of India (RBI) to guarantee that similar occurrences would not happen later. Although the RBI has laid numerous principles against banks delegating these sorts of recovery agents, these agents are still appointed by the banks.
Statute on Protection from Harassment by Banks
The Reserve Bank of India (RBI) issued rules to banks and non-banking financial organizations (NBFCs) in 2021 to safeguard clients against harassment by banks. In order to comply with these recommendations, banks must use a non-coercive recovery strategy and treat clients fairly.
Customers have legal recourse if they are harassed by their bank. The first thing to do is to report the harassment in detail to the bank’s customer service department. Customers can seek remedy from the banking ombudsman if the bank is unable to resolve the situation. Under a number of statutes, such as the Indian Penal Code, 1860, the Consumer Protection Act, 1986, the Banking Regulation Act, 1949, and the Information Technology Act, 2000, customers may also file lawsuits against banks for harassment.
Legal remedies accessible to Banks and NBFCs for credit recovery
- When a bank or financial institution needs to recover any individual’s debts; it uses Original Application (OA) to the Debt Recovery Tribunal against such individual.
- The secured lenders reserve a right to implement Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI ACT,2002). It allows banks or other financial institutions to auction private or business properties to recover credits. The provision of the SARFAESI Act, s applicable if the amount of the NPA loan amount surpasses INR One Lakhs and NPA credit account is more than 20% of the principal and interest.
- Credit taken from the Bank is under an agreement between the Bank and the borrower; hence, the general laws like Law of Contract, Transfer of Property Act, Specific Relief Act, Specific Performance and so on, apply to all banking transactions relying on the nature of the transaction.
- In India, the remedy accessible to moneylenders is to file an ordinary money suit for recovery against the defaulting borrower for the pending amounts.
Conclusion and Current Norms
In order to prevent recovery agents from upsetting borrowers, the Reserve Bank of India has issued guidelines under Asset Reconstruction Companies (ARCs). These guidelines include the establishment of a fair practices code and a complaint redressal system, which will also facilitate the expeditious resolution of legitimate borrowers’ objections. Furthermore, RBI held that the ARCs had to provide the borrowers with the name and phone number of the designated complaint redressal representative. The process will essentially examine legitimate grievances, which includes addressing services provided by the contracted office in conjunction with the recovery representatives.
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