Recovery agents pursue customers and businesses that owe payments to banks and other private lenders. They are usually third party agencies as they are not part of the original contract, and therefore they act on their own accord without tarnishing the name of who appointed them. Most recovery agents act on behalf of their client for a fee or a percentage of the total money owed. It is performance related and so it encourages a determined agent who will go to all lengths and will use any tactic to get money out of you.
A recent case of an 81 year old lady who was being severely harassed by recovery agents, managed to file a case against them. She received 375 calls regarding her son’s unpaid EMI.
According to a report in The Times of India, a private bus was stopped and 42 passengers were held hostage for 3 hours by recovery agents, who wanted to recover money from the travel company that owned the bus.
These types of incidents just shows to what lengths debt recovery agents are prepared to go to, to recover outstanding debts on behalf of the banks and loan companies. Recovery agents are truly feared in India.
There are many instances about the illegal actions of recovery agents. Debtors have had to face humiliating and degrading behaviour in front of family, friends and relatives, to the extent of intimidation and physical threats. The banks seem to turn a blind eye to this type of behaviour, as long as they are receiving their money they will continue to ignore it. This is the major problem we face, as there is no real control to make sure this type of behaviour is stopped. As a result, we have come to know that people have committed suicide or developed major health problems due to this menacing behaviour.
The recovery agent’s job is to collect as much money as they can from a debtor, whose case has usually been passed to them by the bank. The debt is passed on for recovery action because the debtor has missed consecutive payments and has broken the contractual agreement on let’s say a credit card or a loan.
Statistically, the average debtor has 6 creditors that he/she owes money to. The problem is that the total EMI needed to cover all payments is more than the money left over after you have paid your basic living expenses. Therefore, you will always be behind on payments, or you will be missing a payment due for another creditor to cover the one that is applying pressure. This is not ideal as the issue is only postponed until the following month, I believe the saying is, ‘robbing Peter to pay Paul’.
There are limited options for you at this stage. You could take out another loan to consolidate all of the outstanding debts, however, this is not always the best option as that consolidation loan may come at a high interest rate due to your damaged Cibil score, potentially falling into the same trap, albeit with only one creditor. You could also make a settlement with the bank at a reduced balance if you have the funds to do so. The latter will always go against you as the debt has not been paid in full and will be recorded on your Cibil report, you will find it difficult to obtain further credit in the future.
So how do we really address this problem? Is there a non-borrowing solution that will resolve this once and for all?
A non-borrowing solution would allow you to take control of your debts without having to get into further debt.
Luckily, there is some light at the end of the tunnel. Debt Management Plans or DMP.
A debt management plan has worked successfully in many countries example visit www.writemypapers.org. It works by calculating your monthly income and monthly living expenditure, (excluding your EMI’s towards your creditors), to work out what money you have left to put towards your debts. This is called ‘Disposable Income’.
This disposable income is then split to your creditors on a pro-rata basis. That means the creditor you owe the most to will receive a larger proportion of the available disposable income, giving you peace of mind that your creditors are receiving their payments every month. This will in-turn, reduce or completely stop the harassment from recovery agents.
At the same time, you are not asking for a settlement, the creditor is paid in full, but over a longer period than your contractual agreement and to what you can afford without ‘robbing Peter to pay Paul’.
A debt management firm can put all of this in place for you. There is usually a fee for the service, but it stops the ‘wolves’ coming to your door. It is also an informal arrangement with the debt management firm, meaning that you can cancel the debt repayment plan at any time (free of charge) if you feel that you are in a financial position to do so.