When a person has fallen behind on their credit card payments, they have reached credit card default. Defaulting on a credit card has major consequences that influence not only the relationship between the defaulter and the credit card provider, but also the defaulter's credit score in general and their ability to obtain other credit-based services. The judgements pertain to the laws that govern credit card defaults.
Do banks have the authority to employ alternate means of recovery instead of employing the due process of law, i.e., through courts, tribunals, or commissions?
While there are criteria for both lending and recovery that stipulate that no force or abuse should be used in recovery procedures, these abuses occur in the absence of an efficient oversight agency. Further, recovery of loans can only take place through legal means and the Banks do not have the authority to employ recovery agents who use force to recover loans from credit card defaulters.
Supreme Court of India
Manager, Icici Bank Ltd vs Prakash Kaur & Ors on 26 February, 2007
Author: . A Lakshmanan
Bench: Dr. Ar. Lakshmanan, Altamas Kabir
CASE NO.:
Appeal (crl.) 267 of 2007
PETITIONER:
Manager, ICICI Bank Ltd
RESPONDENT:
Prakash Kaur & Ors
DATE OF JUDGMENT: 26/02/2007
BENCH:
Dr. AR. Lakshmanan & Altamas Kabir
JUDGMENT:
J U D G M E N T (Arising Out of SLP (Crl.) No. 15 OF 2007) Dr. AR. Lakshmanan, J.
I had the privilege of perusing the judgment proposed by my learned Brother - Hon'ble Mr. Justice Altamas Kabir. While respectfully concurring with the conclusion arrived by the learned Judge, I would like to add the following few paragraphs:-
1) Regarding the role of Recovery Agents use of abusive language due process of law RBI guidelines. FACTORS:
? The issue of Banks employing alternate means of recovery other than by due process of law i.e., either through Courts, Tribunals, Adalats or Commissions is an issue that has to be viewed from two angles (1) from the angle of the common man and (2) from the angle of the bank.
REASONS:
? First of all, the entrance of the multi national banks into the country has spread the culture of Credit Cards, Loans on an unimaginable level where rather than the rich, it is the middle class, the lower middle class and the lower class who are at the receiving end of the bonanzas promised by the Banks.
? Inadequate information on the Credit Card application, Loan Applications, Advertisements or even while meeting the bankers in person in respect of the lending rates and hidden charges, leads to this class of people being lured into the buying of the Credit Cards or taking of the home loan or education loan without knowing the ramifications of non-payment and default.
? The first mistake here is most definitely on the part of the bank who does not believe in educating the masses regarding the promises. Once the credit card or loan is taken and there appears a default, then the witch-hunt begins.
? Now the bank is the aggressor and the public is the victim. The first step to recovery of the money due is through the so called RECOVERY/COLLECTION AGENTS. A very dignified term used for paid recovery agents who are individual and independent contractors hired by the Banks to trace the defaulters and to both physically, mentally and emotionally torture and force them into submitting their dues.
? A man's self respect, stature in society are all immaterial to the agent who is only primed at recovery. This is the modernized version of Shylock's pound of flesh. No explanation is given regarding the interest charge and the bank takes cover under the guise of the holder of the card or loan having signed the agreement whose fine print is never read or explained to the owner. ? When a harassed man approaches the Court or the police station he is not armed with a recording phone and finds it difficult to give evidence of the abuse he has suffered. Here the bank gets away with everything. Young and Old members of the family threatened on streets, institutions and also at home at godforsaken hours by these agents who have the full support of their contractor bank. The stance taken by the bank in any suit alleging such incidents is that no such agent has been appointed by them or their agents do not misbehave in the manner aforesaid and if found guilty the agents have to bear the cross and the bank gets away scot free.
? Using of the abusive language for recovery is the norm of the day for most nationalized or multi national bank or non-nationalized bank. Though some are smart enough to record the abuse and proceed to establish the same through Court of Law, most of them are unfortunate not to have recourse to it. Such people form the majority and such litigations are pending in large volumes before the Civil and Consumer Courts. Again the banks escape liability since these agents are not salaried employees of the bank and hence not directly liable for anything. ? Taking it from the angle of the common man the inflow of software money and high salaries has resulted in uncontrolled expenditure. Rather than utility it is a fashion to carry a card for it makes a statement depending on the type of card one carries. ? To maintain ones image one pays the price of utilizing the card without realizing that even a single day's delay in payment results in more than 100 to 200 rupees being charged as default and penalty charges, which if accumulates over a month, results in the charges exceeding the actual payment due.
? As for loans, when litigation is commenced by the customer against the bank or an institution, then they refuse to divulge the true statement of account stating that it will be produced in court. This gives ample scope for manipulation.
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The Banking Regulations Act, 1949, regulates the recovery of loans from credit card defaulters. The Act does not specify how a bank's business should be conducted. It only covers the registration and incorporation of a bank, as well as placing the bank under RBI's administration.
Since every bank must have a license from the RBI to conduct banking business in India, if and when both nationalized and MNB banks consistently violate any of the rules and regulations over a period of time, strictures should be imposed on such banks to curb their high-handed activities and make them accountable to the general public.
It is advised to stay up to date on credit card payments and avoid defaults at all costs. Still, if a default does happen, it is important to keep legal help at hand as cases such as these can get tricky. Further, an expert lawyer can help you in circumventing hefty penalties often imposed on credit card defaulters.
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