it is a known fact that ethical debt collection practices can mitigate financial stress and social harm associated with problematic conduct .
• Such act if enacted can go a long way in strengthening financial ecosystem as a well-regulated industry fosters trust and transparency , promoting responsible borrowing and lending practices .
Before we think of implementation of such an act it is important to know the borrower ’ s rights such as right to notice a financial institution must give you enough time to repay the dues before taking action to repossess your assets or recover the outstanding amount . If the loan is classified as a Non-Performing Asset ( NPA ) and the repayment is overdue by 90 days , the bank or the lending institution has to issue a 60-day notice to repay the dues .
The debtor has a right to fair value , if one fails to clear the dues within the notice period , the bank repossesses their assets , but cannot decide the selling price on its own . Along with the one-month repossession notice informing the debtor about the auction , the bank also has to send a fair value notice to you informing you of the sale price as evaluated by the bank officials . If the debtor feels the sale price is underpriced , he / she has the right to raise objections and state a price that they feel is right . The bank considers debtor ’ s right to receive fair value for your property and then reevaluates the property .
The debtor has a right to be heard , he / she has a right to raise an objection to the repossession notice sent by the bank during the notice period .
The next is the right to claim the balance , there might be a possibility of getting a high sale price for debtor ’ s property that had been repossessed by the bank .
If the bank has some balance left after recovering the outstanding balance , the debtor has the right to claim the balance amount .
There is the right to be treated politely which is enshrined in the banks as they are regulated entities . They do not have the right to mistreat or harass one for defaulting . The bank has to keep certain things in mind when they are communicating with their customers . A collection officer / bank agent has to politely request to meet debtor at a place and time that ’ s convenient for you .
We cannot just talk of the rights of the debtor while ignoring the right of a bank or lender in case of default which are , the right to sue the customer for the recovery of the loan , the right to take possession of the estate for which the loan is used for , the right to foreclose which involves asking the court to order repayment within a specified time , the right to take possession and sell the property involved in the loan and the right to appoint a receiver for the estate as an alternative to outright sale of the property . These rights are applied when they involve third parties like debt collectors during their enforcement .
Now that the rights of each party are known , collection agencies are usually called upon to intervene by lenders so as to recover the money owed meaning they are the integral part of the lending process but their activities call for enactment of debt collection act .
It is important to note that implementing the debt collection agencies ’ act effectively may present itself with certain challenges :
• On adapting to any new regulations the existing debt collection companies and personnel will no doubt require training and adjustments to comply with the Act ’ s requirements .
• Secondly the enforcement and monitoring mechanism need to be robust thus ensure ongoing compliance and effective investigation of complaints .
• There is need to consider carefully financial inclusion concerns requiring balancing stringent regulations with access to credit for deserving individuals .
• There is also need to reign in on nonregulated lenders to ensure most if not all lenders are regulated , as the unregulated lenders are known for violation of debtor ’ s right .
Building a sustainable future requires enactment of debt collection agencies ’ act which will mark a new chapter for debt collection . While there could be challenges to be overcome , the Act if enacted will provide a solid foundation for creating a more fair , ethical , and consumer-centric industry . Stakeholders , including government agencies , financial institutions , debt collection companies , and consumer advocacy groups , must work together to ensure that such an Act ’ s comes into effect .
Continuous collaboration , coupled with ongoing evaluation of the collection environment , can pave the way for a transformed debt collection landscape . This dream act will no doubt boost financial stability , protect vulnerable individuals , and contribute to a healthier and more responsible financial ecosystem for all .
Wasilwa Miriongi is a Certified Credit Professional currently working as the Managing Director , Del Creder Credit Management Limited . You can engage him on this or related matters via email at : WMiriongi @ gmail . com .