The Hindu : Andhra Pradesh / Hyderabad News : Banks cannot employ recovery agents consumer notes

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Monday, Nov 17, 2008
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Andhra Pradesh

Andhra Pradesh - Hyderabad

Banks cannot employ recovery agents consumer notes

K. Vijaya Bhaskara Reddy

Ruling of State Consumer Disputes Redressal Commission

Calling numbers covered under ‘National Don’t Call Registry’ illegal
State Bank of India fined in September for harassing a customer

HYDERABAD: The State Consumer Disputes Redressal Commission has categorically ruled that banks using recovery agents and calling numbers that were covered under ‘National Don’t Call Registry’ was illegal.

Employing agents for loan recovery created quite a furore in the recent past after they drove some people to even commit suicide.

On September 17, the Commission fined State Bank of India (SBI) and SBI Cards and Payment Services Pvt. Ltd., a non-banking financial company (NBFC) affiliated to the bank, for harassing a customer through recovery agents and intimidating on phone, despite timely payment of her credit card dues.

Extra charges

K. Sandhya Rani, a gynaecologist residing at Banjara Hills, took an SBI credit card in 2002.

She later found that the bank was collecting extra charges ranging from Rs.1,200 to Rs.1,500 every month, notwithstanding her in-time clearance of dues.

Ms. Sandhya Rani could not get credit card statements to her changed address even after she communicated the same to the bank.

In October, 2006, the bank informed her that the card facility had been withdrawn and she needed to pay the outstanding balance of Rs.40,302. The customer replied to the bank saying that she had paid off the entire amount and would not like to have their service any more.

Threatening calls

Ignoring her reply, the bank’s recovery agents started threatening her directly and through phone calls.

Learning that the bank had entrusted the credit card division to an unofficial agency, she sued the agency, the bank and the Reserve Bank of India (RBI) in Hyderabad District Forum- III, demanding a compensation of Rs.4.99 lakh for causing mental agony. The District Forum found fault with the bank and its agency and ordered to pay her punitive damages of Rs.50,000, compensation of Rs.30,000 and Rs.2,000 for court costs. The agency contested the verdict in the State Commission.

Norms for NBFCs

The Reserve Bank of India, second respondent in the case, said that the credit card agency was an NBFC and it was supposed to follow their Fair Practices Code (FPC), according to which the NBFCs should mention the interest rates explicitly and send statements to the customers regularly.

Agency disobeys FPC

The Commission found that the agency disobeyed the FPC and also faulted it for its acts of intimidation.

However, the Commission amended the District Forum’s verdict and confined the penalty only to Rs.50,000.

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