Introduction
You’re two months overdue on your credit card bill. One day, your mother gets a phone call from an unidentified number. They say they’re from your bank and start questioning her about your employment, financial situation, and when you will be able to repay your debt. Your mother starts to feel anxious and confused because she doesn’t know what to say.
Or, maybe a co-worker received a call from a collection company for an unpaid loan. The person collecting the debt shares that they will proceed with legal action against you for your missed payments. You feel embarrassed, hopeless and overwhelmed with anxiety.
Does this sound familiar to you? How about to someone you know? There are millions of people in India that are experiencing this type of intimidation, abuse and trauma each and every year because of collection agencies working for banks and other lenders making collections on overdue items.
The legality of this matter can be summarized by an important fact— that what has occurred in the past is indeed ILLEGAL! The Reserve Bank of India (RBI) has established specific guidelines on how Recovery Agents should act.
The guidelines are outlined in a document called the Fair Practices Code (FPC) and include specific restrictions on the Recovery Agent’s ability to contact or communicate with the Borrower. Therefore, you, as a Borrower, have rights that cannot be violated by any Recovery Agent. This article will identify, in everyday terms, what those rights are, what Recovery Agents can or cannot do, and what steps to take if your or your family members are being harassed regarding repayment of a loan.
What is the RBI’s Fair Practices Code?
The Reserve Bank of India (RBI) has established a Fair Practices Code. The terms in the Fair Practices Code outline how banks and non-banking financial companies should treat borrowers, specifically in relation to the handling of loans and credit card payments.
The Fair Practices Code applies to all banks and NBFCs. This means that a bank cannot act in any manner when you have defaulted on your loan. The bank must adhere to certain rules, and it does have boundaries that it cannot exceed.
In addition, the RBI has developed separate and specific guidelines regarding recovery agents; these are outlined in the RBI’s Master Circular regarding Credit Card Operations, as well as guidelines for the appointment of recovery agents by banks. All of these documents set forth the requirement that recovery agents treat borrowers with dignity and respect at all times.
To summarise, the Fair Practices Code prohibits the bank from engaging in any unfair, abusive, or threatening behaviour towards the borrower during the collection of a debt. Additionally, the Fair Practices Code is a legal document and therefore banks not complying with these codes will be subject to enforcement action by the RBI.
Is It Legal for Recovery Agents to Call Your Friends or Relatives?
When it comes to this type of harassment, many people want a simple answer to the question. Here’s a quick response:
No, it’s illegal. Recovery agents are forbidden by law from contacting any of your family members, friends, coworkers, or neighbors to embarrass or coerce you into paying back your debt.
According to the Reserve Bank of India, a recovery agent cannot call one of your friends and say, “Your friend owes us money and hasn’t paid us, so please advise them to pay.” They cannot call your mother to discuss your credit card debt. They cannot call a coworker and threaten to sue you if you do not pay.
Exchanging your financial information with a third party without your consent is a breach of your right to confidentiality, which violates the RBI’s Fair Practices Code.
The only exception to this rule occurs if there is a person who has signed as a guarantor for your loan. A guarantor is a person who legally guarantees to pay back the debt if you do not. In this case, the bank would have a right to contact the guarantor, but the recovery agent must use a professional demeanor and cannot use threatening or obscene language.
For everyone else — your parents, siblings, spouse (unless they are a co-borrower), friends, and colleagues — calling them about your debt is completely out of bounds.
Your Legal Rights Under the RBI’s Fair Practices Code
Let us now take a closer look at your rights as a borrower according to the RBI’s guidelines. These rights aren’t simply recommendations – they’re mandated rules of law that banks must abide by.
Right 1: Right to be treated with dignity
Every borrower has the right to receive basic dignity and respect from their lender. Recovery agents may not use profanity, yell at you, threaten you or berate you while calling upon you to collect your debt. They design their strategies to create a feeling of fear-of arrest will occur if you do not pay.
The RBI prohibits agents from exhibiting any mental or emotional abuse when attempting to collect a debt, which means they must exhibit their professionalism and civility within their collection activities.
Right 2: The Right to Know Who You Are Speaking to.
All collection agents must provide you with your name and the name of the financial institution or agency they represent, as well as the exact reason they are calling you (i.e., the account, loan, or credit card in question).
One violation of the RBI’s guidelines is the failure of a collection agent to properly identify himself or herself and/or give you generic responses; therefore, you are under no obligation to converse with an unidentified caller who violates this provision, and you have the right to terminate the call at any time.
Right 3: The Right to be Contacted Only in Reasonable Timeframes.
Collection agents may only contact you between the hours of 8:00 AM and 7:00 PM, and therefore may not contact you very late at night, very early in the morning, or at other unreasonable hours unless you have specifically given them permission to contact you during those times.
If you receive calls at 11 PM or 6 AM on a continual basis, you should consider this action to be a blatant violation of the RBI’s regulations. Keep accurate records of these phone calls (i.e., date, time, what was said) for use in filing a complaint.
Right 4: The Right to Privacy and Confidentiality
This means that your loan details, credit card dues, and financial information are private and confidential and cannot be disclosed to a third party without your permission. In other words, banks and their recovery agents cannot share your debt with your family, friends, neighbours, or coworkers. If a recovery agent calls your relative and says, “Your family member owes Rs. 80,000 and has not paid in 3 months,” they are violating your right to privacy. This violation of confidentiality would be considered a breach of the RBI Guidelines for Banks and other general law violations.
Right 5: The Right to Deal Only with Trained and Verified Agents
The Reserve Bank of India’s guidelines now require banks to make certain all recovery agents are trained and have their backgrounds checked before deployment to the field. Additionally, banks must provide each of their agents with valid identification as proof of their employment.
As such, if you receive a visit or phone call from a recovery agent, he/she must be able to show you valid ID and state which bank he/she works for. If they do not have valid ID, you do not have to deal with them. If a person shows up on your doorstep claiming to be a recovery agent, but does not produce valid ID you can refuse to engage with that person and report them to the bank.
Right 6: The Right to File a Complaint and Receive a Response
RBI regulations require all banks to establish grievance redressal systems. So every consumer has the right to file a complaint regarding the conduct of a recovery agent and receive prompt attention and resolution from the bank.
If the bank does not adequately respond or resolve your complaint, you have the right to forward your complaint to the RBI’s Banking Ombudsman a free independent third party service established to deal with banking-related consumer complaints.
A Real-Life Example: Rahul’s Story
At the age of 32, Rahul works in I.T., and is a single man living in Delhi, India. He has an outstanding credit card balance of 85,000, which he was unable to pay due to unexpected medical expenses in his family. He missed three consecutive months; as such, a recovery agent started calling him around the clock – including Sunday mornings and late evenings – typically while making rude and aggressive threats of violence against him, such as, “I’ll have you arrested if you don’t pay me.”
These repeated calls soon escalated to interference with all people connected to him; including his mother, wife, and co-workers; by telling them about him not repaying his debt so that they would pressure him into payment. In addition to him being totally embarrassed for putting his loved ones through the stress of these relentless phone calls, he couldn’t believe how they were being harassed.
A friend advised him to research the Reserve Bank of India’s (RBI) Fair Practices Code, to educate himself on how the recovery agent was treating him. He then began to document all of the calls he had received – including date, time, recovery agent’s name and what they said to him. He finally wrote a formal complaint to the Grievance Redressal Officer of his credit card issuer describing how badly he had been treated in accordance with the RBI Fair Practices Code and outlining the numerous violations of the code performed by the recovery agent.
Rahul, a bank customer, experienced unsatisfactory treatment by the bank in the form of harassment. After not receiving a proper response from the bank within 30 days, Rahul escalated his issue by filing a complaint against the bank using the RBI Banking Ombudsman online portal cms.rbi.org.in. A few weeks after filing his complaint, the bank was contacted to give a response regarding its behaviour towards Rahul. Since that time, all harassment by the bank stopped completely. Additionally, the bank provided Rahul with a written apology for its poor treatment and has provided him with an option to renegotiate his payment plan.
Rahul’s experience is a testament that when one is aware of their consumer rights and follows the appropriate course of action, they are protected by law from being victimized by any concern in society.
Step-by-Step: What to Do If a Recovery Agent Harasses You or Your Relatives
Step 1 — Start Documenting Everything Immediately
When you start to think a recovery agent is going too far, go ahead and start documenting! Record the date and time of all calls or visits. Make notes of the name of the agent (if they give it), the telephone number from which they called, and what they said. Write it down as well if they called family/friend or work. Keep all the text messages or WhatsApp messages you get. If you can record calls on the phone and this is legal in your state, then record the calls. This will be significant proof at the time of filing a complaint.
Step 2 — Write a Formal Complaint to the Bank’s Grievance Officer
All banks in India must have a Grievance Redressal Officer. The officer’s contact information can be found on your bank’s official website. Compose a clear and factual grievance. Provide the full name, credit card or loan account number, a description of what occurred, the date(s) of the incident(s), the time(s) of the incident(s), and the name(s) of the agent(s) if available or their phone number(s). Specify also whether or not your relatives or colleagues were contacted without authorization. Ask the bank to immediately get rid of the harassment. Make this complaint in writing (via e-mail). As per the rules of the RBI the bank is required to acknowledge the complaint within 30 days.
Step 3 — Escalate to the RBI Banking Ombudsman
The banking complain can be lodged with the Banking Ombudsman of RBI if there is no reply received from the bank within 30 days of filing or if the issues are not resolved by the bank. This service is all free! It doesn’t require an attorney to use. Go to the official RBI complaint form (cms.rbi.org.in) and provide all the information. Be certain you include your evidence: your call notes, screen shot images and a copy of your complaint you sent to the bank. The Ombudsman will look into the situation, and may require the bank to rectify the situation, including in some cases providing you with compensation.
Step 4 — File a Police Complaint for Serious Harassment
In case of repeated calling at an inappropriate time, visiting your residence in an intimidating manner or communicating threats of any sort, then it is better to get a First Information Report (FIR) filed at your local police station as well as at the police station in the district the agent is staying. This type of activity may be subject to criminal charges under Section 503 and Section 506 of the Indian Penal Code on criminal intimidation and threats. You can also place a report with the Cyber Crime Cell in your city, if harassment occurs in WhatsApp messages, social media or any other digital means.
Step 5 — Approach the Consumer Forum
The Consumer Protection Act, 2019, also considers recovery agent harassment as a deficiency of service. In this case, you are able to lodge a complaint with your district level consumers’ redressal forum or Consumer Forum, as it is called. The Consumer Forum can demand payment of any compensation from the bank you receive for mental distress arising from the harassment! It can also send a signal for the bank to cease and desist from engaging in these activities. The process of lodging a complaint in the Consumer Forum is free and does not need a lawyer but you could have one.
Documents You Will Need to File a Complaint
In case you are complaining against the bank, the RBI Ombudsman, police or the Consumer Forum, you need to be prepared with the following documents:
A written record/log of all calls, dates, times and content of call.
“Screenshots” of any messages received from “recovery agents”
Information from call recordings (where available or legally acquired).
The name and/or phone number of the recovery agent (if known).
Names of family and/or friends called; what they were told
- Your credit card or loan account number
- A copy of any previous communication from the bank
A copy of the complaint you made to the Bank’s Grievance Officer
The more effective your complaint will be the better your documentation is. Just because you can’t supply products for every entry on this list, don’t put off filing a complaint. Any evidence, is better than no evidence.
Frequently Asked Questions (FAQs)
Q1. Can a debt collection agency call my family about my credit card debt?
No, a debt collection agency cannot contact your family members unless they are a co-borrower or a guarantor on the loan you took. The debt collection agency contacting your family to put pressure on you or embarrass you is a violation of the RBI fair practice code and your right to privacy. If you have been contacted by your family for these reasons, you should document it and file a complaint with the bank’s grievance officer immediately.
Q2. What if a bank’s recovery agent has continued to call me repeatedly after 7 PM?
This would be a violation of RBI rules. Recovery agents are only allowed to contact you between 8:00 AM and 7:00 PM. If a recovery agent calls you after 7:00 PM, you need to record the date, time and phone number of each call made to you after these hours. These records will assist you in making a complaint to the bank or with the RBI Banking Ombudsman.
Q3. If I refuse to talk to a debt collector who doesn’t identify themselves, can they pursue me since they’re not legally acting under duress?
Yes! You have every right to refuse to communicate with any debt collector that does not properly identify themself based on what the Fair Debt Collection Practices Act (FDCPA) requires.
Your identification of them allows you to determine if this person is able and willing to help you resolve your issue and possibly protect your credit profile.
If a person calls you and refuses to provide the name of the bank or financial institution they are working with as well as the reason for calling you, you have the right to terminate that phone call without penalty from either party involved.
Q4. Will my RBI filing affect my CIBIL score?
Your filing of a complaint with either the Reserve Bank of India (RBI) or the Banking Ombudsman will not have any effect on your credit score. The unpaid debt that caused the collection process may have an impact on your CIBIL score until you resolve the payment issue through re-entering treaty obligations.
It is best to resolve payment issues while making a complaint. As a result, if you are able to reach a partial payment arrangement, this can help protect your credit history and potentially enhance your CIBIL score.
Q5. Am I able to sue my bank based on the actions of their recovery agent?
You are able to sue your bank if their recovery agents cause you any mental distress, embarrassment, or injury. You may pursue compensation from your bank through either the Consumer Forum or a civil court. There have been multiple cases in India where banks are ordered to pay damages to customers due to the actions of their recovery agents. You can also notify the RBI Ombudsman, who may instruct a bank to pay damages to you based upon the actions of their recovery agent.
Conclusion
While debt is already a heavy burden to bear, going through the additional rigors of a recovery agent calling their mother at 10 PM, embarrassing them in front of a colleague, or using threatening language to scare their family is totally unwarranted.
There are clear controls put bid through the Reserve Bank of India to ensure this does not take place. Recovery agents must act with dignity toward a debtor. They cannot call your friends or relatives. They cannot threaten, and they most certainly cannot use abusive language. They cannot contact you after certain hours of the day. They must, moreover, identify themselves properly.
If you feel that any of the above have been violated, they offer you legal protection that is quite strong. Everything must be carefully documented. Send the bank’s Grievance Officer a letter. If this does not elicit an appropriate response, complain to the RBI Banking Ombudsman — it costs nothing, it involves no pain, and it is effective.
The law is on your side in this case; you are not defenseless. Be aware of your rights, take the necessary steps, and do so without hesitation.
References and Sources
- Reserve Bank of India — Master Circular on Credit Card Operations: www.rbi.org.in
- RBI Guidelines on Engagement of Recovery Agents by Banks
- RBI Fair Practices Code for Non-Banking Financial Companies (NBFCs)
- RBI Integrated Ombudsman Scheme, 2021: cms.rbi.org.in
- Consumer Protection Act, 2019 — Ministry of Consumer Affairs, Government of India
- Indian Penal Code — Sections 503 and 506 (Criminal Intimidation)
- Banking Codes and Standards Board of India (BCSBI) — Code of Bank’s Commitment to Customers
