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FINDING A WAY THROUGH DEBT COLLECTION DISPUTE
Banks, financial organizations, and corporate debtors have all expressed serious concerns about the problem of non-performing assets (“NPA”) and debt recovery. In order to tackle this difficulty, a strong legal framework is established for debt recovery, intending to ensure prompt and effective resolution of debt recovery cases. Debt collection disputes require a keen understanding of local laws and regulations.
UNDERSTANDING THE RIGHTS
Debt collection practices are governed by the Reserve Bank of India (“RBI”) guidelines and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (“SARFAESI”) Act, among other regulations. These laws provide certain protections to consumers, including:
- Verification of Debt: Consumers have the right to request verification of the debt from the creditor or debt collector. This verification should include details of the original debt and any subsequent transactions. This step is crucial to ensure that consumer are being asked to pay a legitimate debt and that the amount being claimed is accurate.
- Cease and Desist: While there isn’t a specific provision for a “cease and desist” request in the law, consumers can request that debt collectors communicate with them in writing only. Additionally, harassment by debt collectors is prohibited. Debt collectors cannot threaten consumers, use abusive language, or intimidation tactics to make consumers pay.
3. Fair Practices: Debt collectors must adhere to fair practices while attempting to recover debts. This includes providing clear and accurate information about the debt, as well as offering reasonable opportunities for repayment. Debt collectors are also prohibited from contacting at unreasonable hours or disclosing information about the debt to third parties without consent.
CIVIL SUIT
To recover the loan, creditors may initiate a civil lawsuit in the relevant court. This entails starting a formal legal procedure, providing proof, and asking the court for an order for the debt to be repaid. The notice functions as a formal communication requesting payment of overdue obligations or that damages be compensated. The party who feels wronged may proceed with filing a civil suit in the relevant court if the debtor disregards the notice. Following that, the court will decide whether to award compensation or debt recovery after reviewing the evidence and legal arguments put up by both sides.
SUMMARY SUIT
Order 37 of the Civil Procedure Code (CPC) allows creditors to file a summary suit for modest debts that don’t surpass a specified level and allows a plaintiff to obtain a quick and summary judgment against the defendant.
DEBT RECOVERY TRIBUNAL (“DRT”)
Under the Recovery of Debts Due to Banks and Financial Institutions Act of 1993, specialized forums known as DRTs were created. Unlike civil courts, they handle issues involving the recovery of loans from borrowers and offer a speedier decision. Deciding bank and financial institution applications for debt recovery is the DRT’s main function. This gives the Tribunal the authority to handle debt recovery-related matters. Additionally, it ensures that financial institutions and banks have a legal way to recover their dues.
ESTABLISHMENT OF TRIBUNALS FOR DEBT RECOVERY AND APPEALS
The establishment of Debt Recovery Tribunals (DRT) and Debts Recovery Appellate Tribunals (DRAT) under the Recovery of Debts due to the Bank and Financial Institutions (RDBFI) Act, 1993, and other relevant legislation, offer specialized forums for resolving debt recovery issues. These tribunals are essential in hastening the settlement of issues involving debt and providing a specialized forum for adjudicating debt recovery matters.
SARFAESI ACT
Subject to certain restrictions, the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (“SARFAESI”) Act gives banks and other financial institutions the authority to seize and sell the secured assets of non-compliant borrowers without court’s intervention.
INSOLVENCY AND BANKRUPTCY CODE (“IBC”)
Under the IBC, creditors may start insolvency procedures if the debtor is unable to pay back the loan. This facilitates the settlement and retrieval of debts via the procedure of corporate insolvency resolution process, known as liquidation.
STEPS TO RESOLVE DISPUTES
- Review Documentation: Maintain detailed documentation of every conversation with the debt collector, including the names, dates, and times of all parties. In the event that more action is needed, this paperwork will be an invaluable piece of evidence.
- Dispute Resolution: It is advised to communicate with the debt collector in writing rather than over the phone. Draft a formal letter requesting that they stop harassing immediately and specifying that the preference is to be contacted only by written communication. Send this letter by courier or registered mail so that delivery confirmation can be provided. If there is an error with the debt being collected, dispute it with the creditor or debt collector in writing. Alternatively, the Consumer can approach the banking ombudsman for the complaint related to harassment by any bank or financial institution and in case another resolution is required he may approach to consumer forum or National Company Law Tribunal(“NCLT”)
- Negotiate a Settlement: If unable to pay the full amount owed, try negotiating a settlement with the creditor or debt collector. In some cases, Creditors can directly negotiate with the debtor to reach a settlement to repay outstanding debt in a lump-sum payment or arrange a payment plan through installments.
4. Seek Legal Assistance: If the harassment persists despite the written communication, or If unsure about the rights or need assistance resolving the dispute, consider seeking legal advice from a legal professional. A legal professional can guide on the rights available to the consumer and legal remedies and in further matters legal professional can provide representation, if necessary.
HOW WE CAN HELP?
As a legal firm specializing in consumer protection laws, our experts are dedicated to helping individuals navigate debt collection disputes effectively.
- Our experts clarify the legal rights under the law and offer specialized legal advice based on particular circumstances.
- Our legal professionals stay up-to-date with the latest developments in legal compliance related to debt collection, ensuring that rights are protected throughout
- Our experts represent the client, if required, and negotiate the settlement in their favor.
- Our experts also provide arbitrational services to reach a settlement and execute fair and transparent process.
