If you are stuck in such a situation, here is what to do.

Mr. Rohan Sharma, a resident of the bustling city of Anandpur, found himself in a difficult financial position. After taking a personal loan from a Non-Banking Financial Company (NBFC), “SwiftLoan Finance,” to cover unexpected medical expenses for his family, he unfortunately lost his job. His inability to pay the Equated Monthly Instalments (EMIs) on time led to a distressing situation. He began receiving incessant calls from recovery agents employed by “Apex Collection Services.” The calls soon escalated to threats, abusive language, and messages sent to his relatives, falsely accusing him of being a “defaulter” and a “fraud.” The agents even sent a fake legal notice on a fabricated letterhead, causing immense mental anguish to Mr. Sharma and his family. This scenario is unfortunately common, but it is crucial to understand that you have legal rights and remedies against such harassment.

Advice in such cases

Facing financial hardship is challenging, but succumbing to illegal pressure tactics is not the solution. Here is a strategic approach to handle the situation:

• Cease Further Borrowing: The first and most critical step is to stop the cycle of debt. Avoid taking new loans from other applications or lenders to pay off an existing one. This only deepens the financial crisis and increases mental stress.
• Maintain Written Communication: Always communicate with the lender (bank or NBFC) in writing. If you anticipate missing an EMI, proactively send an email or a letter via registered post. Clearly state your genuine reasons, such as job loss, a medical crisis, or any other significant hardship. Attach supporting documents if possible, like a termination letter or medical reports. In your communication, you can request a temporary moratorium or a restructuring of the loan. This creates a crucial paper trail proving you are not absconding and have been transparent about your situation.
• Negotiate a Settlement: If your financial situation does not permit repayment as per the original schedule, you can propose a “One-Time Settlement” (OTS). Lenders are often open to settling the loan for a reduced amount, especially when presented with genuine proof of hardship. Ensure any settlement agreement is formally documented and you receive a “No Dues Certificate” (NDC) upon payment.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think

Applicable Sections of Law

While defaulting on a loan is a civil matter, the harassment tactics used by recovery agents can constitute criminal offenses. The following legal provisions are relevant:

• Reserve Bank of India (RBI) Guidelines: The RBI has issued strict guidelines on Fair Practices Code for Lenders. These guidelines prohibit banks and NBFCs from harassing borrowers. Agents cannot call at odd hours (before 8 AM and after 7 PM), use abusive language, or resort to intimidation.
• Bharatiya Nyaya Sanhita, 2023 (BNS):
  • Section 351 (Criminal Intimidation): If agents threaten you or your family with injury to person, property, or reputation, it is a punishable offense.
  • Section 344 (Extortion): Forcing a person to pay money under the threat of harm amounts to extortion.
  • Section 356 (Defamation): Spreading false information about you to your employer, family, or neighbours to harm your reputation is illegal.
• Information Technology Act, 2000: If the harassment occurs through digital means, such as threatening messages on WhatsApp or defamatory posts on social media, relevant sections of the IT Act can also be invoked.

If you are the complainant

If you are being harassed by recovery agents, you are the complainant in the eyes of the law. You must take proactive steps to seek justice:

• Gather All Evidence: Systematically collect all proof of harassment. This includes call recordings, screenshots of messages and call logs, emails, and any fake notices received. If agents visit your home, try to record the interaction or note down the names and vehicle numbers.
• File a Police Complaint: Visit your nearest police station and file a formal complaint (FIR) against the recovery agents and the lending institution. Provide all the evidence you have collected. The police are obligated to register an FIR if a cognizable offense is disclosed.
• Report to the RBI: File a formal complaint against the bank or NBFC on the RBI’s Complaint Management System (CMS) portal. The RBI takes such complaints very seriously and can impose penalties on the lender.
• Consumer Complaint: You can also file a complaint with the Consumer Dispute Redressal Forum for deficiency in service by the lender.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think

If you are the victim

As a victim of such illegal recovery practices, your priority should be your safety and mental well-being while initiating legal action.

• Do Not Engage or Argue: Avoid getting into heated arguments with abusive recovery agents. State your position calmly and disconnect the call. Inform them that all future communication must be in writing.
• Inform Your Family and Employer: If you fear the agents might contact your family or workplace, it is wise to preemptively inform them about the situation and the illegal nature of the agents’ conduct. This can prevent them from being misled or alarmed.
• Prioritize Mental Health: Harassment can take a severe toll on your mental health. Remember that a financial default is not a crime, and you are not a criminal for being unable to pay a loan. Seeking support from friends, family, or a mental health professional is a sign of strength.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think

How the police behave in such cases

Initially, some police officers may view the matter as a civil dispute between a borrower and a lender and might be hesitant to file an FIR. However, it is your right to have your complaint registered if it involves criminal acts. You should calmly and firmly explain how the agents’ actions constitute criminal intimidation, extortion, or defamation under the BNS. Presenting clear and organized evidence is key. If the local police refuse to register an FIR, you can approach a senior police official (like the Superintendent of Police) or file a private complaint before the Magistrate under Section 156(3) of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023.

FAQs people normally have

Here are answers to some common questions:

• Is defaulting on a loan a criminal offense? No. A loan default is a civil matter. You cannot be arrested or imprisoned for being unable to pay an EMI for a personal loan or credit card. It only becomes a criminal offense if there was fraud involved from the outset (e.g., taking a loan with forged documents with no intention to repay).
• Can recovery agents visit my home or workplace? Yes, they can visit to discuss repayment, but they must do so respectfully and during civil hours (8 AM to 7 PM). They cannot create a scene, threaten you, or discuss your private financial matters with colleagues or neighbours.
• Do I have to pay a settlement amount if offered? A settlement is a mutual agreement. You are not obligated to accept the first offer. You can negotiate a settlement amount that is feasible for you. Always insist on a written settlement agreement before making any payment.

What evidence is required?

Strong evidence is the backbone of a successful legal complaint. You should meticulously collect:

• Digital Evidence: Screenshots of all threatening or abusive messages (SMS, WhatsApp), call logs showing excessive calling, and most importantly, audio or video recordings of conversations with the agents.
• Documentary Evidence: Any fake legal notices, letters, or emails sent by the recovery agency. Keep copies of all your written communication with the lender.
• Witness Statements: If the harassment occurred in front of family members, neighbours, or colleagues, their testimony can serve as valuable evidence.

How long will the investigation take?

The duration of a police investigation under the BNSS can vary significantly. For a straightforward case with clear digital evidence, the investigation and filing of a chargesheet can be relatively quick. However, complexities like identifying anonymous callers, the need for forensic analysis of evidence, or the uncooperative attitude of the accused can prolong the process. Typically, it can take anywhere from a few months to over a year, depending on the specifics of the case and the workload of the investigating authorities.

Advocate Sudhir Rao, Supreme Court of India