Monday 30 June, 2008

The case of Andre Stevan Butelho

Mr. Butelho holds an ICICI credit card number 4477-XXXX-XX59-2000. As Mr. Butelho was unable to make payments on this card ICICI bank offered him a settlement through one of its DSA, Synergy Consultants. Synergy Consultants is owned by Mr. Prakash Kokare from B 10/5 Ground Floor, Mathuradas Colony, Vidynanagri, Mumbai 400098 and has telephone numbers 66753437 / 26654177.

An agent of Synergy Consultants by the name of Gyaneshwar went to the office of Mr. Andre on 7/8th May 2008 (date is not confirmed) and handed over a settlement letter. On receipt of this letter, Mr. Butelho made a payment of Rs. 10,000 to this agent. As this transaction took place during working hours and due to other pressures, Mr. Butelho forgot to take cash receipt from the agent.

For all practical purposes Mr. Butelho assumed that his account had been closed.

Then one fine day he got a call from ICICI Bank asking him for payment. Mr. Butelho narrated the entire case to Mr. Shrikant at ICICI JB Nagar Office (Tel 66493667) on his visit to the branch and also showed the settlement letter to him.

He was shocked when the bank told him that the letter he was presenting was forged.

When Mr. Butelho tried to contact Mr. Gyaneshwar, he would not pick up his phone (9967098934). Mr. Butelho then approached the association for help.

When we called up Mr. Gyaneshwar’s number it was answered by his friend, Mr. Prakash Kadam. He gave us another number (9920204045). When we called this number a person by the name of Mr. Santosh Gunty responded and told us that Mr. Gyaneshwar has been sacked from service. He later back tracked from this version and told us that he was the team leader and that Mr. Gyaneshwar was on leave. When we asked for his address and contact information, Mr. Gunty refused to divulge any information. He gave us the mobile number of Mr. Prakash Kokare (9820101202).

When we called Mr. Prakash Kokare, he requested for the settlement letter to be faxed to him, which we did. On receipt of the fax Mr. Prakash told us that he will investigate the matter and come back to us.

When he reverted he told us that he has spoken to Mr. Gyaneshwar and according to his agent no money was received from Mr. Butelho and no letter issued. He gave us a contact number of a person by the name of Manish Acharya (Tel 66493435) who is tasked within ICICI bank to handle all such issues.

When we call this number there is no response.

Bottomline: ICICI is a cheat and its agents and associates are no better. We are now filing a criminal complaint of cheating with the Bhandup Police Station where the incident of payment took place.

Harassment from HSBC Bank

Mr Hariram is a member of our association.

He hold the following HSBC Credit Cards
card no 4476-XXXX-XXXX-1048 and 5548-XXXX-XXXX-8852

This is his story

To give you a jist of the case, i had offered them a settlement proposition almost one and a half year s back , but they refused to come forward . subsequently they went on harrasing my parents at hyderabad , inspite of the fact that the bank has my official address and my residence address in mumbai.

One of the calls was made by a guy called Nilesh (may not be his real name as these people never reveal their full names) to my parents in Hydreabad, he introduces himself as a lawyer and that he has lent me 3lacs and he needs it back. They refused to give their contact address in mumbai.

Subsequently when my wife spoke to him, she informed him to come to the association office . On hearing this he started abusing my wife, and he refused to take the address. he had threatened with dire consequences . [ calls received from 67115654 , 67115689 ] when we called these numbers it rings no one attends. I understand that these numbers have only outgoing facility , no incoming as confirmed by Tata Indicom.

On saturday 28th June 2008 my wife got a call from this number 32937841 , a girl named medha who was calling from dtdc courier and there was a packet for me from delhi . when my wife asked for the name of the sender from delhi she refused to give as also their office address. this is also from hsbc.

I am very clear in the sense my settlement amount is not going to be more than 10k both cards, whether hsbc takes it or not . becasue they have harrassed my family, moreso my old parents.

Hariram.

----------------------------

Abuses continue, RBI continues to sleep

Monday 23 June, 2008

The case of Parvez Billimoria

Mr. Parvez Billimoria is in a serious debt trap.

Since 1976, Mr. Billimoria, a Manager with National Garage, Mumbai, has been using credit cards. He has been issued Credit Cards by companies like Citibank, ICICI, ABN Amro, etc left right and center. He has more than 30 credit cards. And now he has no money to pay any one of them.

To compound his problems, these banks have been sending him unsolicited loans. ICICI sent him two cheques of 4 Lacs each.

Mr. Billimoria is 58 years old. When ICICI sent him the loan cheques he had just 1 more year of service left. Mr Billimoria does not own any property. He is actually staying with his wife in a property provided to him by Parsi Trust.

With no income to service these credit cards, Mr. Billimoria has no option other than to take cover under Bankruptcy Laws and seek protection from the courts.

Mr. Billimoria is receiving more than 20 calls every day from recovery agencies. ABN Amro wants him to commit suicide such that they can claim his insurance. Mr. Rahul Verma is calling him from ABN Amro Gurgaon Office (Phone Number 0124-4181344) and asking Mr. Billimoria to sell his wife so that ABN Amro's money can be recovered.

The reason we write about him is to point an accusing finger to the MNC and Private Banks which have thrown all caution to wind and not exercised proper due-diligence in giving loans to Mr. Billimoria. And now when they are not getting their dues, they are using the choicest of foul language in harassing an already stressed customer to the point of suicide.

Mr. Billimoria may commit suicide, if he does so, CCAI will file a case of abetment of suicide against all the banks and credit card companies that are driving him to a point of no return.

This is a warning to all banks and credit card companies to back off and also to RBI to wake up to the continued abuse of its guidelines on recovery of loans.

Mr. Reddy Sir, Governor RBI, all these banks are cooking a snook to you, what are you going to do?

Friday 13 June, 2008

How ABN Amro and Other Foreign Banks including Indian Private Banks cheat customers

When you take a personal loan from any Foreign or Indian Private Bank including ICICI, HDFC, Kotak Mahindra, please be sure of the fact that they have decided to cheat you right at the very outset itself.

When you take a loan, you are given a cheque which is normally dated for the second or the third week of the month. By the time the money is in your account, it is the end of the month.

And as per agreement executed by you, the bank is now ready to take back the first installment. This is where the cheating happens.

First, the bank does not give you the full amount of the loan, deducting the processing charges at source along with the service tax and all other levies.

Secondly, the bank takes back the first installment in the first week of the month that follows the disbursal date. Therefore in effect you are paying back the bank interest on the entire amount within 7 to 10 days of getting the loan.

This is a standard sharp practice deployed by all the banks other than nationalized banks.

With nationalized banks you may face a delay but they will never cheat you. Do you know why? Because promotions in Nationalized banks are not linked to returns generated by an individual. Whereas in MNC and Private Indian Banks, fresh MBA's are hell bent on increasing the profit of the bank in the hope that they will be able to climb the ladder of success faster, and they do!

KV Kamath takes home 10,00,00,000 per month as salary, how is that for success! He also holds stock options in the bank that he is heading. Do you think the owners of these banks pay these salaries?

If you said yes, you are completely wrong. It is the customers of the bank that make it possible for the company to pay Mr. Kamath the salary quoted above. And what does Mr. Kamath and his team do? Find new ways of cheating the customers that are paying for his salary!

ICICI Bank is above Supreme Court of India

ICICI Bank continues to employ the same procedure even after the Supreme Court of India has passed severe strictures against it.

In a recent case, Mr. Sandip Narayan Pagde approached us with a complaint against ICICI Bank. He had taken a Maruti Omni on a 5 year loan from ICICI. His installment was 4800/- which he has been paying till February 2008. With just 11 installments remaining balance, Mr. Pagde's vehicle was re-possessed by ICICI Bank because he had fallen behind in making 4 payments. He offered to make those payments but in his absence, ICICI recovery agents took away the vehicle by misleading his wife. They told her that Mr Pagde had just to pay 4 installments and then the vehicle could be his without making any further payment.

This is a very standard technique used by these recovery agents, they lure you with a false promise and a lucrative deal. In fact all they promise is false to start with.

In this case, when Mr Sandip approached the bank for taking back his vehicle, he was informed that the vehicle has already been sold for 70,000/-. This sale had taken place without the consent of the owner and in clear violation of Supreme Court guidelines in all such cases.

We are sure people in the recovery department, including one Mr. Dinesh Singh, who sits at the infamous RPG Tower, JB Nagar Branch of ICICI bank made a pot of money at the expense of the poor vehicle owner.

Their modus-operandi is simple. They will pick up a vehicle where there is even a small default. Then they will sell the vehicle to an agent of their choice by taking some money officially and a lot of money un-officially. All the people in the recovery departments of these banks including ICICI, HDFC, HSBC, CitiBank, etc are following the same practice.

Read Supreme Court Judgment below


"Banks cannot employ goondas to recover loans"

J. Venkatesan
Feb 27, 2007

NEW DELHI: The Supreme Court on Monday deprecated the procedure adopted by commercial banks of employing musclemen as agents to recover the outstanding loan amount from defaulters.

A Bench of Justices A.R. Lakshmanan and Altamas Kabir, in separate but concurring judgments, said: "We are governed by a rule of law in the country. The recovery of loans or seizures of vehicles could be done only through legal means. The banks cannot employ goondas to take possession by force."

The Bench was disposing of an appeal filed by the ICICI Bank against an order passed by the Allahabad High Court rejecting its plea to quash the criminal cases registered by the U.P. Government against the Managing Director and top officials for using criminal force against a loan defaulter.

The case was registered at the instance of the High Court on a complaint from Prakash Kaur, a 75-year-old widow, that the bank had sent musclemen to seize the vehicle for non-payment of one instalment of loan.

Mr. Justice Lakshmanan said: "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 recover 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."

He said: "A man's self-respect, stature in society are all immaterial to the agent who is only primed at recovery. This is the modernised 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."

The Judge said: "It is mandatory that the banks be held vicariously liable for such acts of agents..."

Thursday 12 June, 2008

Another murder from ICICI with admission of guilt

Argument by ICICI "Killers on contact - Not the bank employee"

When the supari become legal in this country??? Take care of your life if you deal with the ICICI bank.

For more, read the following news item

"Ten days after being blamed for the suicide of 38-year old Prakash Sarvankar, ICICI Bank has given his family an ex-gratia payment of more than Rs 15 lakhs, reports CNBC-TV18.

Six-year old Prajakta was witness to her father being harassed by recovery agents of ICICI Bank, when he defaulted on a loan of Rs 50,000, which the bank describes as “small ticket”. Fed up of the insults, on September 17, Prakash Sarvankar hanged himself and blamed recovery agents of the ICICI Bank in his suicide note.

The incident evoked strong reactions from activists, who blamed the bank for using strong arm tactics. Now the bank has announced an ex-gratia payment to Sarvankar’s family, which includes a fixed deposit, which will give them about Rs 9,500 a month and insurance of Rs 25 lakh over 20 years.

But Sarvankar’s widow is still inconsolable.

“ He is not going to come back,” said Priyanka Sarvankar, Prakash Sarvankar’s widow.

Consumer organisations welcome the move, but demand stricter checks and balances on banks.

"Even the senior most official, in this case the CEO of the bank, is responsible for this,” said Vinod Chand, General Secretary, Credit Consumers Association of India.


For now four men are under arrest for abetting Sarvankar’s suicide. One of them is the owner of the recovery agency, and another, Kailash Choudhary, is an employee of I-Process. The police are investigating whether senior officials of the bank are responsible as well.

An inquiry has been launched into that alleged incident of harassment. The RBI backed Banking Codes and Standards Board of India has stepped in. According to sources, BCSBI has shot off a letter to ICICI Bank asking if it had done adequate due diligence before appointing the collection agency.

BCSBI also asked ICICI Bank to spell out the action taken against the agency and produce details of tangible evidence, which show that such incidents do not recur."
ICICI Bank fined Rs 50 lakh: Its recovery agents had beaten up man with iron rod

Express news service
Posted online: Tuesday , November 06, 2007 at 12:00:00
Updated: Tuesday , November 06, 2007 at 01:47:0

New Delhi, November 5 The State Consumer Commission has fined ICICI Bank Rs 50 lakh and ordered it to pay Rs 5 lakh to a borrower whose friend was beaten with iron rods and left bleeding on the road by recovery agents.

The commission described the bank’s conduct as “abominable” and in violation of orders of the Supreme Court. The fine will be held in a fund meant to provide complainants free legal aid.

In his complaint, Tapan Bose, a resident of Pandav Nagar, said he borrowed Rs 3.4 lakh from the bank in 2005 to buy a Maruti Swift. He paid monthly installments regularly. When three of his post-dated installment cheques bounced, he went to the bank and cleared the dues in cash. The bank never returned the bounced cheques.

Later Bose was unable to pay four installments, but the bank did not send him notice. Its recovery agents struck on January 8, when Bose and his friend’s son Vinod were visiting the Delhi District Cricket Association Club on Bahadur Shah Zafar Road.

Bose said he went into the club but Vinod preferred to stay back and listen to music on the car radio. He said he’d barely entered the club when he got a missed call from Vinod on his cellphone. When he went to check what it was about, he found the car missing and Vinod lying on the road bleeding. Vinod was admitted to LNJP Hospital, where he spent two weeks. In his statement to police, Vinod said a man knocked on the car window and asked him to reverse the vehicle. When he asked why, the man said he was from ICICI Bank, pulled him out and started beating him up. He said the last thing he remembered was being beaten up by three-four men and hit on the head with an iron rod. Police recovered the car from the bank’s godown. It was restored to Bose on a court order.

The bank told the commission that it had engaged Elegance Collxns to deal with loan defaulters. Justice JD Kapoor took the bank to task for “taking the law into its hands, causing multiple and serious injuries, and humiliating and insulting the man in public.”

http://www.expressindia.com/latest-news/ICICI-Bank-fined-Rs-50-lakh-Its-recovery-agents-had-beaten-up-man-with-iron-rod/236573/

Top 10 Tips for avoiding Credit Card Problems


Do not pay membership fees. There’s no reason to. Either call your customer service representative and insist that the fee be waived, or find a better deal at consumer-friendly.

Reduce your bank credit accounts to a maximum of two. One for a monthly balance: a no-frills card with low interest (under 9.9% fixed or 7.9% variable). The other to be paid off each month: a higher interest rate card with benefits like free car rental insurance or annual itemized statements.

Make sure the “grace” period is at least 21 days. And resist frequent flyer reward programs with membership fees unless you charge over $2,000 per month. In general, the best rewards are cash-back programs–-at least 1.0 percent of all charges--with
some over 2.0 percent after exceeding a specified level. If you choose a “free” gift, make sure that the delivery fees are modest or you will “eat up” your hard-earned points.

DEMAND a lower interest rate. Call your customer service representative and bargain over the phone. Play hardball and insist on talking to a supervisor--the worst they can do is say “no,” and that’s unlikely.

Lock in a fixed rate account now. Interest rates are likely to continue to rise, including home mortgages.

Look out for the “bait and switch” maneuver. If the credit offer sounds too good to be true, it probably is. Make sure that the credit card you receive is the one you applied for by carefully checking the terms--and if it isn’t, demand the original terms or cancel the credit card immediately.

Monitor “fixed for life” interest rates. It’s not unusual for the 3.9 percentage rate that you started with to jump to 28.9 percent simply due to rising balances on other bank accounts or being late by only one day on a single payment–-and we have the U.S. Congress-sanctioned “universal default” provision to thank.

Check for “tiered” interest rates on your account balances. Oftentimes cash advances, normal purchases and low introductory “teaser” specials are charged at differing rates. Keep in mind these short-term rates can expire and leave you with a large balance at the higher rate.

Cancel unused credit accounts. You may have accounts open you don’t even remember, like store credit cards, harming your credit score. Check your free credit report at www.annualcreditreport.com and cancel the most recent accounts first.

Don’t even think about a credit card “benefit” program. These unemployment and disability programs are pricey and worthless. Use the premium you’re NOT paying to pay down balances instead.

http://www.stopthesqueeze.org/

http://www.indebtwetrust.org/

Trapped by debt? Free yourself in 7 steps

The Basics
Trapped by debt? Free yourself in 7 steps

There's an economic recovery coming, and what an opportunity for you: Now you have time to get your financial life under control.

By Terry Savage

The recession may be over -- or it may have been so brief that it didn’t officially qualify as a recession in spite of all the official pronouncements. But whatever the statistics say, many American families still find themselves in a personal financial recession.

Americans are declaring bankruptcy at record rates, with one in every 100 families affected by a bankruptcy. Though the stigma has diminished, the effects linger, touching your life in unexpected ways. For example, many prospective employers will pull a credit report as a character reference.

If you’re overwhelmed with debt, the economy is giving you some breathing room now. Take advantage of the upturn to liquidate your debt. The next time around, you might not have this opportunity. There’s still a push in Congress for more stringent bankruptcy legislation. And if interest rates start to rise, the burden of variable-rate credit cards and mortgages will become heavier to bear.

Americans are now carrying $683 billion in revolving credit card debt. That’s not the amount we charge every month; it’s the outstanding unpaid balances on which people pay interest. And, according to a report by Cambridge Consumer Credit Index, 47% of the people who paid less than the full amount on their credit card bills in a recent month, made only the minimum payment due. In fact, only 13% of Americans with an outstanding balance could afford to pay more than half the balance.

Pay now, or pay and pay and pay later
Not paying off the debt is a strategy that will bury you in interest charges. The way some companies calculate the required minimum payments, it could take you as long as 30 years to pay off your original purchase. And along the way, you’ll pay four times the original charge in finance charges.

Surely the purchase that seems so important this month isn’t worth a lifetime of indebtedness. The couch that is so attractive today will likely be long gone in 30 years. Vacation memories and photos will be faded if you’re just paying off that hotel bill in three decades. And a meal charged today is down the drain before the bill even arrives.

It’s time to rein in that debt and do something about paying it down. Here are seven steps you can take to get your debt under control:

Step No. 1: Make a list of what you owe. This first step may be the hardest part of dealing with your debt. Put all your bills in a pile. Then list your debts in order, starting with the largest balance first. Next to the amount, list the minimum monthly payment, and the interest rate you’re paying on that card. Now you know where you stand.

Step No. 2: Prioritize your repayments. If you have one or two small balances, you might want to apply extra money to pay them off, while continuing to pay the minimums on the cards with larger balances. Or you might want to pay off the card with the highest interest rate first.

When you’ve paid off the smaller balances, attack the larger ones. Here’s a trick that can save you years of interest charges. Simply double the minimum monthly payment -- and don’t charge another penny. That should get you out of debt in less than three years.
You can also use the debt evaluation tool at MSN Money. It will help you evaluate your situation and prioritize your payments.

Step No. 3: Eliminate credit cards and don’t roll over balances. When you pay off a card, notify the company that you want to close the account. Don’t just stick the card back in your wallet where it will tempt you again.

And don’t roll balances from card to card. This is a tempting way to make yourself believe that you’re doing something about your debt problem, if only by lowering the interest rate you’re paying. Switching from card to card has drawbacks. Every time you get a new card, you’re generating an outstanding open credit line that will appear on your credit report. Other lenders may be unwilling to let you keep rolling balances. And when those tempting introductory rates expire, you could be stuck with huge balances on high rate cards.

Step No. 4: Get a copy of your credit report and credit score -- and study both carefully. Your credit report is simply a compilation of your bill-paying history. Don’t hide from the truth. There may be some errors on your credit report that you’ll want to correct by contacting merchants. And if you do make progress toward paying down your balances, you’ll want to make sure they’re correctly reported.

You’re entitled to a free copy of your credit report if you’ve been turned down for a loan or a credit card. And there are many Web sites that offer a report for under $10 -- or even for free, if you sign up for a credit monitoring service that you might not need.

Your credit score is a different, more complex evaluation of your creditworthiness. Your credit score doesn’t just report your payment history; it uses a formula that assigns a weigh to factors such as bill repayment habits, percent of available credit used, and even your employment history. This credit score is used in almost every mortgage decision, and may be used in one form or another when pricing life or homeowner's insurance or car loans.

The most frequently used version of the credit score is the FICO score created by Fair Isaac & Co., the company that pioneered the concept of scoring. A FICO score ranges between 300 and 850. About 39% of the population scores above 750 -- and a score below that level is a warning signal.

Some aspects of your credit report are beyond your immediate control. They’re calculations based on the length of time you’ve had the same accounts open. But other factors in your credit score that weigh heavily are your timely bill-paying habits and the percentage of your credit limit that you are using on each card.

You can get a copy of your Equifax credit report and your FICO score at myFICO.com or you can click here on MSN Money. The cost is $12.95 -- and it includes online access so you can track any changes in your credit report.

And by 2005 you should be able to get credit reports for free. The Fair and Accurate Credit Transactions Act, signed into law by Congress in Dec. 2003, gives every American the right to a free credit report every year from each of the three major credit bureaus: Equifax, Experian and TransUnion. But it will take a while for the government to write the exact regulations for the freebies and more months for the companies to comply.

Step No. 5: Make a spending plan. Now’s the time to change your free-spending ways. To do that, track the money that’s coming in and going out. Fortunately, there are easy ways to do that. One thing worth spending money on is personal finance software such as Microsoft Money and Quicken. Both programs let you track all your check writing by category and make monthly comparisons of your actual spending to the amount you’ve budgeted.

Use a debit card instead of your credit card. Then, when you download your bank transactions into your Quicken or Money program, all of your debit transactions will be included, and can be easily categorized. (If you’re not paying bills online, you’ll need to keep the receipts and enter them into your checkbook and your budget plan.) Your bank ATM card is a debit card if it carries the Visa or MasterCard logo. You won’t earn points for your purchases, but you won’t run up bills that have to be paid at the end of the month. You can only use the card if you have money in your account!

Step No. 6: Be careful about the equity in your home. In the past few years, Americans have withdrawn billions of dollars worth of equity in their homes. The ads and commercials are tempting, because the rates on home equity loans are typically lower than the rates charged on outstanding credit card balances. And the interest on a home equity loan may be deductible.

But there are dangers in home equity loans. Frequently, the money is used to pay down credit cards, which are then charged up again. The banking industry has a term for it: reloading.

Be very careful about digging into this last reserve. Yes, home values have been rising 5% to 6% a year in recent years, according to data from the National Association of Realtors. But there’s no guarantee that home prices will continue to rise at the current pace. And if you have future problems that require cash, you’ll have no place to turn. Instead, you’re putting your house on the line.

Step No. 7: Get help. Sometimes credit problems are easily attacked once you’ve faced up to them. But for some people, the problem of overspending is a psychological one. Spending can become a habit that’s as difficult to kick as alcohol, drugs or gambling. And then there are those who are over their head in debt because of circumstances they truly could not avoid: medical bills or divorce or loss of a job.

In those cases, it’s wise to seek help from professionals. The only problem is that there are so many advertisements for “credit counseling” that you can’t be sure whether they’re rip-offs. I’d suggest you stick with one of the national, non-profit credit counseling services such as Consumer Credit Counseling Services.

Many people are afraid that just one visit will be reported to the credit bureaus and make their problems even worse. That’s not the case. You can talk with a credit counselor on a private basis. Only if you enter their debt repayment program, where they contact your creditors and arrange for lower payments or interest rates, does this relationship appear on your credit report.

Another excellent source of advice and assistance is Myvesta, formerly Debt Counselors of America, a nonprofit financial crisis center. (See link at left.) Myvesta offers individualized counseling, a debt management service, advice on avoiding bankruptcy and foreclosure, and even counseling for families buried in debt. This is another source you can trust completely. Of course, all the counseling and advice in the world is useless without your own personal determination to deal with your debt.

The bottom line
If you’ve taken these seven steps, you should be able to work your way out of debt and toward a brighter future. It will take time and lots of self-discipline. It’s worth the effort.

Complaints about excessive interest charged by NBFCs

Date: May 24, 2007
Complaints about excessive interest charged by NBFCs
RBI/2006-2007/414
DNBS.PD/ CC.No. 95 /03.05.002 /2006-07
May 24, 2007

To,
All Non-Banking Financial Companies (NBFCs)
Including Residuary Non- Banking Companies (RNBCs)

Dear Sir,

Complaints about excessive interest charged by NBFCs


  1. The Reserve Bank has been receiving several complaints regarding levying of excessive interest and charges on certain loans and advances by NBFCs.
  2. Though interest rates are not regulated by the Bank, rates of interest beyond a certain level may be seen to be excessive and can neither be sustainable nor be conforming to normal financial practice.
  3. Boards of NBFCs are, therefore, advised to lay out appropriate internal principles and procedures in determining interest rates and processing and other charges.
  4. In this regard the guidelines indicated in the Fair Practices Code about transparency in respect of terms and conditions of the loans may be kept in view.
  5. NBFCs may confirm having put in place appropriate systems in this regard within a period of one month from the date of this circular to the Regional Office of this Department in whose jurisdiction they are registered.


Yours faithfully
(P Krishnamurthy)
Chief General Manager In-Charge

The Millionaire Next Door

"The Millionaire Next Door" is the title of a best-selling book published around 1990. The book was the result of research on how everyday people became wealthy. The book outlined the habits of self-made millionaires (those with a net worth of at least $10 million).

The book revealed the fact that self-made millionaires are frugal and tend to live simple lives. Contrary to the way they are portrayed in the media, the typical millionaire is not a doctor or lawyer; he is a self-employed person who works at least 60 hours a week in his own small business. He might run a very unglamorous business, such as an automobile junkyard. He also drives a six-year old vehicle (the most popular, a Ford pick-up); does not accumulate debt; shops for bargains; lives in a home well below his means (upper middle class); and invests his money in mutual funds and other types of relatively safe investments and watches it grow over time.

The typical millionaire is not interested in "keeping up with the Jones'." They don't have 100 pairs of shoes or a late model, expensive car. They don't buy designer clothes or spend $100 for a haircut. His neighbors and friends would never guess he was a millionaire unless he told them.

Most importantly, the typical millionaire develops a budget and financial plan and sticks to it religiously.

If you want to have real wealth instead of the appearance of wealth, stop spending your money on things designed to impress other people, and adopt the habits and values of those who are truly rich.

Develop a realistic budget and stick to it. Your ultimate goal is to start saving as much money as you possibly can and investing it wisely. Over time, you will get out of debt and start building real wealth.

When you go over the limit

Banks world over are involved in looting. Here is an example from the US as how banks charge exorbitant fees when you get late in making payments to them.

When you go over the limit

By Bankrate.com
Q. What happens when I charge my credit card over the limit?
You will be socked with a hefty penalty fee. Over-the-limit fees of $25 and $29 are common.
Norm Tapper, a Bankrate.com reader in Indiana, was charged a $25 late fee and $25 over-the-limit fee on a Capital One card with a $300 limit.
Issuers point out that fees are spelled out in the credit-card agreement and monthly statements list credit limit, balance information and due dates. But a lot of people are shocked by over-the-limit fees. In fact, most people learn about a card's over-the-limit penalty after they get charged one.
Credit card issuers have two basic choices when a customer makes a purchase that exceeds a credit limit. They can decline the transaction or approve the transaction and charge a fee.
A third option, approve the transaction and automatically lift the credit line, is reserved for the best customers.

Today's issuers are adept at targeting card offers to a customer's specific credit profile and that includes the handling of over-the-limit charges. Issuers decide what customers can go over credit limits and by how much. The last thing an issuer wants to do is decline a card purchase.
So it looks like issuers will continue to charge bigger and bigger fees to customers who outgrow their credit limits. Don't let it happen to you. Here's how:
1. Monitor spending closely.
Keep track of credit card purchases and stay well within your limit. Leave a big enough cushion on your card for large, unexpected expenses. Some consumer experts recommend keeping one credit card cleared for emergencies.
2. Sign up for free e-mail alerts.
Some issuers send e-mail reminders to customers who are nearing credit limits.
3. Make the limit your limit.
Card holders at Capital One can request that any limit-busting purchase be declined at the point-of-sale. However, most companies refuse to provide this service.
4. Call ahead and get that limit raised.
If you know you're going to go over a credit limit with a purchase, call ahead and request a line increase. Issuers grant increases on a case-by-case basis. It's a worth a shot and it could save you $30.
5. Check out cards from local banks and credit unions.
Penalty fees are much lower, typically $5 to $15, and smaller institutions are much more lenient when it comes to charging them. For example, at Suncoast Schools Federal Credit Union in Tampa, Fla., the $15 over-the-limit fee is not imposed until you exceed the credit line by 8 percent.

Letter to Finance Minister Written in February 2005... but no action as yet...

9th February 2005.


Mr. P. Chidambaram,
The Honable Minister of Finance,
Government of India,
Ministry of Finance,
New Delhi.


Respected Sir,

On behalf of the members of our association, I wish to place before you compelling evidence that will prove beyond doubt the day light robbery being committed by foreign banks or their associate companies in their credit card business.

1. Included with this letter is audio-video evidence of abusive practices adopted by credit card issuing banks. The problem has been independently investigated by the media and they have found enough evidence to suggest that these companies are adopting aggressive and misleading marketing practices followed by illegal recovery methods. Please find time to go through the enclosed video footage which will demonstrate beyond doubt the high handed and criminal methods adopted by these companies. This is included as exhibit ‘A’ for your ready reference.

2. There is a complete lack of any law that allows monitoring the activities of these companies. The activities of these companies affect more than 1.5 Crore Indians and surprisingly, there is no law or guideline available to them for conduct of their business. I have included for your perusal a copy of law enacted in US for the express purpose of preventing credit card companies and other credit recovery agencies from adopting illegal means for recovery of outstanding dues. The law has not only been implemented but is being complied with by these very same companies. The US DoJ has prosecuted companies violating the law. The act and the judgements are enclosed as exhibit ‘B’ and ‘C’ respectively.

3. Please also find time to go through a petition filed by US PRIG (Public Rights Interest Group) in the US against these companies where it has been made clear that these companies follow a method of ‘negative amortization’ that is any outstanding due actually grows bigger if the customer follows the regimen of minimum payment as demanded by the credit card issuing companies. The same is included as exhibit ‘D’ for your ready reference. We have carried out a similar calculation exercise which is marked exhibit ‘E’ which clearly shows that the banks adopt the very same practice here in India too.

4. There also exists enough evidence suggesting that these companies discriminate against the borrower on the basis caste, creed, religion and profession. For example credit cards are denied to Muslims, Lawyers, Politicians, people residing in a particular geographic location and no reasons are ever given for such a denial. These companies are thus indulging in the practice of racial and selective discrimination and therefore should be prosecuted under relevant laws of the land.

5. These exists a law in US called the ‘Equal Credit Opportunity Act’. All these companies adhere to and operate under this law which specifically bars them from discriminating against any person on the basis of caste, creed, color, etc. A copy of the law is enclosed as exhibit ‘F’ for your ready reference. I request that a similar law be enacted to provide all Indians with a fair chance at credit. It is worthy to note that these same banks will never refuse to accept money or open an account or accept deposits on the basis of the same factors that they refuse to lend credit!

6. In the city of Mumbai alone, there are more than 60 to 70 Lac credit cards. The use of a credit card allows a person to have access to an unsecured line of credit. In the guise of providing an unsecured line of credit these credit card companies are flouting and violating all rules and imposing heavy rate of interest on its card members. This rate of interest is around 3% per month and is compounded monthly resulting in a total interest rate in excess of 60% per annum. This is day light robbery and this industry is working without any check or regulation.

7. In case of default of payment of dues, these companies are employing the services of recovery agencies which are totally unregulated. In the matter of recovery of outstanding amounts, these banks threaten the customer under IPC 420 and often take the help of local police in the matter of recovering their monies. As far as my knowledge goes, non-return of borrowed money results in a civil liability and enough remedial measures are available in the law and courts of law allowing for recovery of any outstanding dues. I am enclosing as exhibit ‘G’ a telegram issued to one of our members which clearly demonstrates the interpretation of the law by the credit card issuing bank.

8. Inadvertently the police ends up hauling the credit card holder whereas actually they should be telling the bank to approach the court of law and get the necessary order before taking any action.

9. Also included for your ready perusal is reference material as to how the whole system works and how these companies have adopted the very same predatory methods of cheating the customers worldwide. All this relevant material is enclosed as exhibit ‘F’ for your ready reference.

therefore have the following request to make to you

1. A Parliamentary Commission of Enquiry be immediately setup to investigate all the malpractices being carried out by these banks and credit card issuing companies.

2. Laws on the line of ‘Fair Debt Collection Practices Act’, ‘Equal Credit Opportunity Act’ and any similar law be enacted forthwith to prevent exploitation of the Indian middle class.

3. Clear directions be given to all States of the Union regarding the role of police in all such disputes.

4. Immediate direction to the Governor of Reserve Bank of India to carry out a complete investigation into the affairs of these companies and immediate framing or relevant laws to prevent financial exploitation of the common man.


I assure you of my association complete and unfailing support in taming this wild tiger that is ripping the heart and soul of the middle class of the country.

Thanking you,
Yours Sincerely,


Vijay Kamble
President

Citi, StanChart create card trauma

Khyati Dharamsi/Vivek Kaul

Customers denied loans because banks have wrongly reported overdues to Cibil

MUMBAI: Have you ever been denied a bank loan or credit card on the pretext that you have a bad credit record? And this when you have been paying all your home loan EMIs and credit card bills on time?

Welcome to the dubious world of easy banking. Easy for the bank, tough for some unwary customers.

Take the case of Chandan Lunawat, who heads a commodities export business. He was shocked to learn from his bank that his loan request had been rejected because he owed Citibank Rs3.69 crore on a credit card. The bank that had rejected his loan application had essentially checked with the Credit Information Bureau (India) Ltd (Cibil) database and found this information.

Cibil is a one-stop shop for banks to check the credit histories of individuals.

Lunawat told DNA he had been regularly paying his credit card bills and auto loan EMIs. On being denied the loan, he asked the bank for his credit report, which a bank is obliged to give once it rejects a loan application. That’s when he discovered that he “owed” Citibank Rs3.69 crore on a credit card that was started in July 1995 and closed in October 1995.

“I have never held this credit card which is mentioned in the report,” Lunawat says. “I took up this issue with the bank (Citibank) and they promised me that my name will be removed from the list immediately. But till date it has not been removed,” he told DNA.

Citibank says Lunawat had outstandings on his Diners/Citibank credit card as in July 2006 and that’s why he was reported to Cibil “as per regulatory requirements”.

The bank agrees that it had issued a “no dues outstanding letter” to the customer following a “mutually satisfactory settlement with the customer in August, 2006,” and has promised to correct the customer’s credit history with Cibil “at the earliest.”

In theory, it looks like all’s well that ends well.

But customers need to ask why a settlement reached in August 2006, is not reflected in Cibil’s database two years later? In an era where banks are used to growing at 30-40% every quarter, acquiring customers seems more important than servicing them.

Lunawat’s is not the only case where callous banks have failed to do justice to customers.

According to the Credit Information Companies Rules, 2006, a bank has to send across corrected information to credit information bureaus - in this case Cibil - within a period of 21 days.

In case there is a settlement between the borrower and the bank or the borrower repays his dues, then the bank needs to inform the credit information bureau within 30 days. In Lunawat’s case, more than 20 months have passed and Citibank does not appear to have updated the information.

Vishal Gohil, an employee of Tata Motors in Pune, has a similar story to share. He had applied for a credit card with Standard Chartered Bank. The bank issued a health insurance policy along with the card, something that Gohil did not want. After much effort, he was able to get the insurance policy cancelled.

But the bank continued billing his card for the premium on the health insurance policy he didn’t ask for. This amount Gohil refused to pay and as a result he was reported as a defaulter on Cibil’s database.

He took up the issue with the bank and the latter agreed to reverse the charges, as well update his status on Cibil’s database. But that obviously didn’t happen. “I sought a loan from ICICI Bank, but the bank never responded. Later, when I applied for a loan at HDFC Bank, I got to know that my status was showing as a defaulter on the credit report.

“Later I followed up with my earlier bank (Standard Chartered Bank) and received a confirmation that the data had been updated. Yet, three to four months down the line when I approach banks, I am denied loans”, says Gohil.

Standard Chartered claims it has updated the Cibil database and informed Gohil that there is no outstanding against his name, but the trauma of being called a defaulter and being denied a loan stays with the customer.

People have also suffered because of the lackadaisical attitude of banks to customer concerns. Take the case of Tejinder Singh (name changed on request). Singh got a divorce from his wife some time back. His wife had an add-on card on his credit card. He asked the private sector bank to stop his wife’s add-on card. The card wasn’t stopped. In fact it is still active. “My ex-wife has been on a spending spree and I have refused to pay the money she has been spending after the divorce”, says Singh.

In the meanwhile, the bank has updated his data with Cibil and Singh is now a defaulter as he has refused to pay up money spent by his ex-wife through the add-on card. “I approached a bank for a personal loan recently and was denied one. The bank told me that I had not cleared my credit card bills fully,” he says.

What these examples clearly show is that currently individuals are largely at the mercy of banks when it comes to the kind of credit standing they have.

So what do you do when the bank you have approached for a loan is not ready to give you one because they say you have a bad credit record when you really don’t have one? The first thing to do in such a situation is to get your credit report from the bank. “Then they should take up the issue with Cibil through a bank,” says Sujan Sinha, senior vice-president - retail assets of Axis Bank.

The way the situation stands currently, individuals are largely at the mercy of banks when it comes to get their credit record corrected. Having said that, market sources point out that Cibil is in the process of preparing an Internet-based solution which would allow individuals to access their credit reports at a nominal cost of Rs 100. That still won’t solve the problem of banks declaring you as defaulters through sheer callousness.

Engagement of Recovery Agents by Banks RBI Final Guidelines

RBI/2007-2008/296
DBOD.No.Leg.BC.75 /09.07.005/2007-08
April 24, 2008
All Scheduled Commercial Banks
(Excluding RRBs)
Dear Sir,
Mid-Term Review of the Annual Policy for the year 2007- 08 –
Recovery Agents engaged by banks

Please refer to the paragraph 172 and 173 of the mid-term review of the Annual Policy for the year 2007-08, a copy of which is enclosed. In view of the rise in the number of disputes and litigations against banks for engaging recovery agents in the recent past, it is felt that the adverse publicity would result in serious reputational risk for the banking sector as a whole. A need has therefore arisen to review the policy, practice, and procedure involved in the engagement of recovery agents by banks in India. In this backdrop, Reserve Bank issued draft guidelines which were placed on the web-site for comments of all concerned. Based on the feedback received from a wide spectrum of banks / individuals / organizations, the draft guidelines have been suitably revised and the final guidelines are as follows:

Engagement of Recovery Agents
2. Banks are advised to take into account the following specific considerations while engaging
recovery agents:
(i) ‘Agent’ in these guidelines would include agencies engaged by the bank and the agents/employees of the concerned agencies.
(ii) Banks should have a due diligence process in place for engagement of recovery agents, which should be so structured to cover, among others, individuals involved in the recovery process. The due diligence process should generally conform to the guidelines issued by RBI on outsourcing of financial services vide circular DBOD.No.BP.40/ 21.04.158/ 2006-07 dated November 3, 2006. Further, banks should ensure that the agents engaged by them in the recovery process carry out verification of the antecedents of their employees, which may include pre-employment police verification, as a matter of abundant caution. Banks may decide the periodicity at which reverification of antecedents should be resorted to.
(iii) To ensure due notice and appropriate authorization, banks should inform the borrower the details of recovery agency firms / companies while forwarding default cases to the recovery agency. Further, since in some of the cases, the borrower might not have received the details about the recovery agency due to refusal / non-availability / avoidance and to ensure identification, it would be appropriate if the agent also carries a copy of the notice and the authorization letter from the bank along with the identity card issued to him by the bank or the agency firm / company. Further, where the recovery agency is changed by the bank during the recovery process, in addition to the bank notifying the borrower of the change, the new agent should carry the notice and the authorization letter along with his identity card.
(iv) The notice and the authorization letter should, among other details, also include the telephone numbers of the relevant recovery agency. Banks should ensure that there is a tape recording of the content / text of the calls made by recovery agents to the customers, and vice-versa. Banks may take reasonable precaution such as intimating the customer that the conversation is being recorded, etc.
(v) The up to date details of the recovery agency firms / companies engaged by banks may also be posted on the bank’s website.
(vi) Where a grievance/ complaint has been lodged, banks should not forward cases to recovery agencies till they have finally disposed of any grievance / complaint lodged by the concerned borrower. However, where the bank is convinced, with appropriate proof, that the borrower is continuously making frivolous / vexatious complaints, it may continue with the recovery proceedings through the Recovery Agents even if a grievance / complaint is pending with them. In cases where the subject matter of the borrower’s dues might be sub judice, banks should exercise utmost caution, as appropriate, in referring the matter to the recovery agencies, depending on the circumstances.
(vii) Each bank should have a mechanism whereby the borrowers' grievances with regard to the recovery process can be addressed. The details of the mechanism should also be furnished to the
borrower while advising the details of the recovery agency as at item (iii) above.

Incentives to Recovery Agents
(viii) It is understood that some banks set very stiff recovery targets or offer high incentives to recovery agents. These have, in turn, induced the recovery agents to use intimidatory and questionable methods for recovery of dues. Banks are, therefore, advised to ensure that the contracts with the recovery agents do not induce adoption of uncivilized, unlawful and questionable behaviour or recovery process.

Methods followed by Recovery Agents
(ix) A reference is invited to (a) Circular DBOD.Leg.No.BC.104/ 09.07.007 /2002-03 dated May 5, 2003 regarding Guidelines on Fair Practices Code for Lenders (b) Circular DBOD.No.BP. 40/ 21.04.158/ 2006-07 dated November 3, 2006 regarding outsourcing of financial services and (c) Master Circular DBOD.FSD.BC.17/ 24.01.011/2007-08 dated July 2, 2007 on Credit Card Operations. Further, a reference is also invited to paragraph 6 of the "Code of Bank's Commitment to Customers" (BCSBI Code) pertaining to collection of dues. Banks are advised to strictly adhere to the guidelines / code mentioned above during the loan recovery process.

Training for Recovery Agents
(x) In terms of Para 5.7.1 of our Circular DBOD.NO.BP. 40/ 21.04.158/ 2006-07 dated November 3, 2006 on guidelines on managing risks and code of conduct in outsourcing of financial services by banks, banks were advised that they should ensure that, among others, the recovery agents are properly trained to handle with care and sensitivity, their responsibilities, in particular aspects like hours of calling, privacy of customer information etc.
(xi) Reserve Bank has requested the Indian Banks’ Association to formulate, in consultation with Indian Institute of Banking and Finance (IIBF), a certificate course for Direct Recovery Agents with minimum 100 hours of training. Once the above course is introduced by IIBF, banks should ensure that over a period of one year all their Recovery Agents undergo the above training and obtain the certificate from the above institute. Further, the service providers engaged by banks should also employ only such personnel who have undergone the above training and obtained the certificate from the IIBF. Keeping in view the fact that a large number of agents throughout the country may have to be trained, other institutes/ bank’s own training colleges may provide the training to the recovery agents by having a tie-up arrangement with Indian Institute of Banking and Finance so that there is uniformity in the standards of training. However, every agent will have to pass the examination conducted by IIBF all over India.

Taking possession of property mortgaged / hypothecated to banks
(xii) In a recent case which came up before the Honourable Supreme Court, the Honourable Court observed that we are governed by rule of law in the country and the recovery of loans or seizure of vehicles could be done only through legal means. In this connection it may be mentioned that the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and the Security Interest (Enforcement) Rules, 2002 framed thereunder have laid down well defined procedures not only for enforcing security interest but also for auctioning the movable and immovable property after enforcing the security interest. It is, therefore, desirable that banks rely only on legal remedies available under the relevant statutes while enforcing security interest without intervention of the Courts.
(xiii) Where banks have incorporated a re-possession clause in the contract with the borrower and rely on such re-possession clause for enforcing their rights, they should ensure that the repossession clause is legally valid, complies with the provisions of the Indian Contract Act in letter and spirit, and ensure that such repossession clause is clearly brought to the notice of the borrower at the time of execution of the contract. The terms and conditions of the contract should be strictly in terms of the Recovery Policy and should contain provisions regarding (a) notice period before taking possession (b) circumstances under which the notice period can be waived (c) the procedure for taking possession of the security (d) a provision regarding final chance to be given to the borrower for repayment of loan before the sale / auction of the property (e) the procedure for giving repossession to the borrower and (f) the procedure for sale / auction of the property.

Use of forum of Lok Adalats
(xiv) The Honourable Supreme Court also observed that loans, personal loans, credit card loans and housing loans with less than Rs.10 lakh can be referred to Lok Adalats. In this connection, banks' attention is invited to Circular DBOD.No.Leg.BC.21/09.06.002/2004-05 dated August 3, 2004 wherein they were advised to use the forum of Lok Adalats organized by Civil Courts for recovery of loans. Banks are encouraged to use the forum of Lok Adalats for recovery of personal loans, credit card loans or housing loans with less than Rs.10 lakh as suggested by the Honourable Supreme Court.

Utilisation of credit counsellors
(xv) Banks are encouraged to have in place an appropriate mechanism to utilise the services of the credit counsellors for providing suitable counselling to the borrowers where it becomes aware that the case of a particular borrower deserves sympathetic consideration.

Complaints against the bank / its recovery agents
3. Banks, as principals, are responsible for the actions of their agents. Hence, they should ensure that their agents engaged for recovery of their dues should strictly adhere to the above guidelines and instructions, including the BCSBI Code, while engaged in the process of recovery of dues.
4. Complaints received by Reserve Bank regarding violation of the above guidelines and adoption of abusive practices followed by banks’ recovery agents would be viewed seriously. Reserve Bank may consider imposing a ban on a bank from engaging recovery agents in a particular area, either jurisdictional or functional, for a limited period. In case of persistent breach of above guidelines, Reserve Bank may consider extending the period of ban or the area of ban. Similar supervisory action could be attracted when the High Courts or the Supreme Court pass strictures or impose penalties against any bank or its Directors/ Officers/ agents with regard to policy, practice and procedure related to the recovery process.
5. It is expected that banks would, in the normal course ensure that their employees also adhere to the above guidelines during the loan recovery process.

Periodical Review
6. Banks engaging recovery agents are advised to undertake a periodical review of the mechanism to learn from experience, to effect improvements, and to bring to the notice of the Reserve Bank of India suggestions for improvement in the guidelines.
Yours faithfully
(Prashant Saran)
Chief General Manager-in-Charge


Extracts of Paragraphs 172 and 173 of the Mid-term
review of the Annual Policy for the year 2007-08
Recovery Agents Engaged by Banks

172. In view of the rise in the number of litigations against banks for engaging recovery agents in the recent past, it is felt that the adverse publicity could result in serious reputational risk for the banking sector as a whole. An urgent need has, therefore, arisen to review the policy, practice, procedure involved in the engagement of recovery agents by banks in India. Accordingly, banks are urged to follow prescribed specific considerations while engaging recovery agents.

173. Complaints received by the Reserve Bank regarding abusive practices followed by a bank’s recovery agents would invite serious supervisory disapproval. The Reserve Bank would consider imposing a temporary ban (or even a permanent ban in case of persistent abusive practices) for engaging recovery agents on those banks where strictures have been passed/ penalties have been imposed by a High Court/Supreme Court or against its Directors/Officers with regard to the abusive practices followed by their recovery agents. An operational circular in this regard would be issued by November 15, 2007.

Getting your Credit Information Corrected by CIBIL

Lately, Lenders have been using the threat of CIBIL to blackmail borrowers into paying huge and unjustified outstanding amounts on their loans and credit cards. Banks and other lending institutions have been known to follow sharp practices of selling unwanted Insurance Policies, Mediclaim Policies and the like to unsuspecting credit card holders. They have sold these products many a times without taking consent of the customer.

When customer refuses to pay these charges, the companies resort to outright blackmail and threaten to spoil the credit history of the customer. They are so bold they even send these threats in writing!

As Per Law, the following remedy is available to you when you are a victim of wrong credit history reporting by any lender. It could be Credit Card out standing, Personal Loans or any other type of Credit that has been wrongly reported.

21. Alteration of credit information files and credit reports.—

(1) Any person, who applies for grant or sanction of credit facility, from any credit institution, may request to such institution to furnish him a copy of the credit information obtained by such institution from the credit information company.
(2) Every credit institution shall, on receipt of request under sub-section (1), furnish to the person referred to in that sub-section a copy of the credit information subject to payment of such charges, as may be specified by regulations, by the Reserve Bank in this regard.
(3) If a credit information company or specified user or credit institution in possession or control of the credit information, has not updated the information maintained by it, a borrower or client may request all or any of them to update the information; whether by making an appropriate correction, or addition or otherwise, and on such request the credit information company or the specified user or the credit institution, as the case may be, shall take appropriate steps to update the credit information within thirty days after being requested to do so :
Provided that the credit information company and the specified user shall make the correction, deletion or addition in the credit information only after such correction, deletion or addition has been certified as correct by the concerned credit institution :
Provided further that no such correction, deletion or addition shall be made in the credit information if any dispute relating to such correction, deletion or addition is pending before any arbitrator or tribunal or court and in cases where such dispute is pending, the entries in the books of the concerned credit institution shall be taken into account for the purpose of credit information.

Wednesday 11 June, 2008

Governor Shri Y.V. Reddy’s mid-term policy review statement of 2007-2008 with specific observation on recovery methods adopted by banks

1st November 2007.

PRESS RELEASE

For Immediate Release

Sub: Governor Shri Y.V. Reddy’s mid-term policy review statement of 2007-2008 with specific observation on recovery methods adopted by banks.

First, we wish to place on record our sincerest of thanks to Mr. Y.V. Reddy, Governor, Reserve Bank of India for taking notice of the growing menace of recovery agents in his mid-term review of 2007-2008 and issuing a stern warning to the banks advising them to follow laid down procedures for recovery or face serious action from RBI.

We wish to condemn statements emanating from foreign banks saying that it will become difficult to issue loans to marginal borrowers. We wish to point out that these statements confirm what we have been saying all along that these foreign banks are using the small and marginal borrowers to charge indiscriminate rates of interest ranging between 30% to 75% per annum. Such interest rates are usurious and not tenable under relevant money lenders acts promulgated by various states of the union. We would also like to bring to the attention of the borrowing public at large some of the sharp practices followed by these banks under the Open Market Loan schemes which are not regulated by RBI.

  • It is a common practice to quote interest rates at monthly reducing method but charge on flat rate basis, thus making these loans twice as expensive.
  • It is a common and deceptive practice to lure customers with advertisements saying the loans being offered are without any collateral security and then take blank post dated cheques from the borrower as security for the loan.
  • It is a common and deceptive practice to deposit all the cheques thus taken in one go and /or threaten to do so and force the borrower into lengthy litigation under section 108 of Negotiable Instruments Act for bouncing of cheques. ( A non-bailable offence )
  • It is a common and deceptive practice to lodge such cases at a remote location with an intent to harass the borrower and force him to pay.
  • It is a common and deceptive practice to charge usurious rates of interest to borrowers by not giving loan documents including loan agreement, schedule of payment, etc at the time of soliciting the business of the borrower.
Given the above facts, we wish to reiterate that it is only the small and marginal borrower who will fall into such traps laid down by these foreign banks. Those already having money at their disposal will not borrow under such high rates and deceptive practices followed by banks such as Standard Chartered, American Express, ICICI Bank, Citibank, Citi Financial, GE Countrywide, etc.

For Credit Consumers Association of India



Vijay Kamble
(President)

The Loot is Over

For many years Private and Foreign Banks looted the common Indian people by charging heavy interest in the name of unsecured loans. These rates were between 20% to 80% per annum.

They bought who ever came in their way and got laws enacted using spineless lawmakers.

But Now, the loot is over. RBI has fixed the upper ceiling on unsecured credit at 18% diminishing and calls anything over this usurious . Something we have been demanding since 2003. No wonder CitiFinancial is closing down its branches while IndiaBulls has quietly exited from the markets. There will more companies to follow. Surely when you can not loot you need to scoot!

Letter to Subrata Das DGM, RBI

8th January 2008..

Subrata Das,
Deputy General Manager,
Department of Banking Operations & Development,
Reserve Bank of India,
12th Floor, Central Office Building,
Shahid Bhagat Singh Road, Fort,
Mumbai 400001


Sub: Your Letter bearing reference number DBOD.No.Leg. 8272 /09.07.007/2007-08

Dear Sir,

As usual, your reply to our letter is vague and does not answer any questions that we raised in our letter dated 31st October 2007.

Our main concern is that banks and NBFC’s that are supposed to be under your control are charging usurious rates of interest. You have stated that they should not be doing so.

Can you please clarify as to what rate of interest you assume to be non-usurious? And what rate of interest is usurious ?

We have cases where banks have charged up to 75% p.a. as interest. How come private money lenders have a law that prohibits them from unsecured lending at more than 15% p.a. while banks and NBFC’s such as CitiFinancial, Prime Financial, GE Money etc are charging rates anywhere between 45% to 75% per annum?

What is the RBI doing about such flagrant violation and exploitation of common Indian people?

We look forward to an early reply from your office.

Thanking you,
Yours sincerely,
For Credit Consumers Association of India



Vijay Kamble
(President)


Cc: Mr. Y.V. Reddy, Governor RBI

Letter to Governor RBI Shri Y.V. Reddy

31st October 2007.

Mr. V.Y Reddy,
Governor,
Reserve Bank of India,
Mint Road, Fort,
Mumbai 400001


Sub: Your mid-term policy review statement of 2007-2008 with specific observation on recovery methods adopted by banks.

Dear Sir,

First, we wish to place on record our sincerest of thanks for taking notice of the growing menace of recovery agents in your mid-term review of 2007-2008 and issuing a stern warning to the banks advising them to follow laid down procedures for recovery or face serious action from RBI.

We wish to bring to your attention some of the sharp practices followed by these banks under the Open Market Loan schemes which are not regulated by RBI.

  • It is a common practice to quote interest rates at monthly reducing method but charge on flat rate basis, thus making these loans twice as expensive.
  • It is a common and deceptive practice to lure customers with advertisements saying the loans being offered are without any collateral security and then take blank post dated cheques from the borrower as security for the loan.
  • It is a common and deceptive practice to deposit all the cheques thus taken in one go and /or threaten to do so and force the borrower into lengthy litigation under section 108 of Negotiable Instruments Act for bouncing of cheques. ( A non-bailable offence )
  • It is a common and deceptive practice to lodge such cases at a remote location with an intent to harass the borrower and force him to pay.
  • It is a common and deceptive practice to charge usurious rates of interest to borrowers by not giving loan documents including loan agreement, schedule of payment, etc at the time of soliciting the business of the borrower.

Sir, we request that you take note of these sharp practices of the banks which in the long term have the potential of creating a sub-prime mess in the context of personal, home, consumer and credit card loans in India.

Your positive and affirmative action on our representation will go a long way in providing relief to the poor common people who fall prey to these banks.

Thanking you,
Yours sincerely,
For Credit Consumers Association of India


Vijay Kamble
(President)

Drowned in debt, what do you do?

Poornima Kavlekar, Oulook Money | May 08, 2008 | 10:14 IST

When RV, the car racer from the movie Tara Rum Pum, has a fateful accident, his whole life changes. His inability to continue racing after the accident leaves him penniless. He loses his home, for which he had taken a loan, and all his possessions.

In reality, it could happen to anyone (of course, in a much lesser magnitude). Things could go terribly wrong due to some medical emergency or job retrenchment. It could also be the result of poor money management.

With easy credit available, the lure to spend beyond one's means has also led to many people finding themselves un-able to repay loans, which is leading to increased defaults.

For example, HDFC Bank has curtailed two-wheeler loan disbursement in Uttar Pradesh, North Karnataka, Rajasthan and Haryana. SBI Cards, the second largest credit card issuer in India, has run up a net loss of Rs 186.61 crore (Rs 1.87 billion) in the quarter ended December. Reason: customer defaults.

A recent study by rating agency Crisil suggests that gross non-performing assets in retail loans are likely to increase to 4 per cent over the next two years, from 2.7 per cent as of March 2007. While the figure is not alarming, it definitely signals the possibility of an increase in defaults.

The other side of the coin is the borrower who is not able to repay the loans. The inability of borrowers to communicate their financial issues to their lenders only adds to their mounting debts. As a result, borrowers continue to borrow to pay off their existing debts and find themselves in a vicious cycle. Debts keep mounting and so does creditor harassment.

Spotting bankruptcy

Says Gaurav Mashruwala, a Mumbai-based financial planner: "At the time of repayment of loan, if one does not have the money or assets that can be liquidated, then the individual is bankrupt."

To get out of this situation, the debtor has to seek help at the right time and from the right source. "Unfortunately, this does not happen and a person realises he is in deep trouble only when he reaches a point of no return," says S Rangarajan, a counsellor at the Chennai centre of Abhay, a credit counselling trust sponsored by Bank of India.

How to exit a debt trap

Get Help.There are a few credit counselling centres operating in the country over the last 18 months. Other than Bank of India's Abhay, Disha is another trust, which is sponsored by ICICI Bank. The number of such counselling centres is bound to increase as the Reserve Bank of India has taken initiatives to spread and formalise the credit counselling mechanism in the country.

Legal recourse

A person who is bankrupt and is way out of the purview of credit counselling can consider legal recourse. But many hesitate. "This is because of ignorance and social and economic boycott that a person suffers," says Mumbai-based consumer lawyer Anand Patwardhan. "This should be the last resort as it has long lasting repercussions," warns Lovaii Navlakhi, managing director and chief financial planner, International Money Matters, a financial planning firm.

Who can file for insolvency?

The debtor (borrower), through his legal advisor, has to file a petition to the concerned insolvency court to declare him insolvent. He can do this if he is unable to pay his debts when due, when he is under arrest or imprisonment in execution of the decree of any court for the payment of money, or when an order of attachment is subsisting against his property.

Similarly a creditor, who has a decree or an award of recovery of a certain amount, can also file a petition against the debtor in case his assets are not enough to pay off the debt. The insolvency laws protect the debtor from harassment by all creditors and the creditors get equitable distribution of the debtor's assets.

The law on insolvency is contained in two enactments - Presidency Towns Insolvency Act, 1909 (which applies to erstwhile presidency towns of Calcutta, Madras, and Bombay of British India) and, Provincial Insolvency Act, 1920 (which applies to the whole of India except the presidency towns mentioned above). Both Acts are similar in content.

Property treatment

When a debtor is declared insolvent, his property vests with the receiver or the official assignee (who is assigned by the court) for the purpose of distribution among the creditors.

He will receive master summons from the court stating when he has to submit his tax papers, bank statements, ledger book, cheque book and all other documents that would prove his net worth.

This will be handed over to the official assignee or receiver who will take charge of the assets, evaluate them and realise them for distribution.

Property would include anything that is in the debtor's name - house, car, shares or any other investments that can be converted into cash. In case the debtor acquires a property, wins a lottery or receives an inheritance during insolvency proceedings and before he is discharged, even that would be used for the purpose of distribution among the creditors.

Debt treatment

Once insolvency proceedings are on, the court will publish the matter of insolvency in its official gazette and local papers so that all creditors have a chance to get their claim. If they do not come forward to claim their share, once the insolvent is discharged, he is under no obligation to pay any creditor(s).

Debts that a creditor can prove to the satisfaction of the official receiver or assignee will be taken into account. There should be books of accounts and banking transactions that can prove the debt. Claims will be scrutinised for genuineness.

Interest takes the last priority in the order of repayment. Moreover, it will be at the rate recognised by the court, usually around 6 per cent. In case of default in credit card payment, the court will not recognise the rate of 36-42 per cent that many credit card companies charge towards late payment, default and so on.

Settlement procedure

After deducting the court's expenses for realisation of money out of the assets, it will be distributed rateably among the unsecured creditors (who have given loans without backing of assets). The secured creditor will first have to realise the security (that is, sell the asset) and for the unrealised balance claim as an unsecured creditor out of the funds realised by the official assignee for payment.

In most cases, the assets of the insolvent cannot satisfy all the debts. So the percentage of the settlement to the creditors will depend upon the amount realised by the official assignee.

Take a case of an individual whose debts have mounted to Rs 1 crore (Rs 10 million), out of which Rs 30 lakhs (Rs 3 million) is secured loan. His total assets are worth Rs 40 lakh (RS 4 million) (house, car, shares and other investments). Rs 30 lakh (Rs 3 million) will be claimed by the secured creditor from the total asset value and the remaining Rs 10 lakh (Rs1 million) will be rateably distributed to all the other unsecured creditors like credit cards payments, personal loans and so on.

Says T C A Shrinivasan, a Chennai-based advocate and a retired professor from Dr Ambedkar Government Law College, Chennai: "If the official assignee has reason to believe that there is scope for further payments from the debtor, then instead of an absolute discharge, only a conditional discharge will be given to the insolvent. The debtor might be directed to settle the dues out of his future earnings. These factors are, however, decided on a case-to-case basis."

Disqualifications of an insolvent

On being declared insolvent, you can neither be a director of a company nor a partner in a firm. You are disqualified from contesting elections or holding any public office. You are also debarred from entering into any contract or agreement. Professional bodies like the Bar Council may also prohibit you from practising if you are declared an insolvent.

An insolvent will not be given credit by any public or finance institutions until the order of insolvency is set aside by the court. S. Vasudevan, senior partner at Chennai-based legal firm Vasudevan & Associates, says, "There are, however, instances where a close relative or friend may contribute for his sustenance. This may not be treated as an income of the insolvent."

These disqualifications are removed when he obtains an order of discharge from the court.

Back to normal

To enable one to start his life afresh, the law on insolvency provides for the discharge of an insolvent from the state of insolvency. This is the last stage of the proceedings and it releases the debtor from all the debts provable in insolvency.

For this, the insolvent has to apply to the court seeking permission to annul the insolvency. Once the court is satisfied with the debt repayment, it will release him from the state of insolvency. This process, however, can be very lengthy and time-consuming.

Says Vasudevan: "If an insolvent intends to resume normal life, he will have to apply to the court seeking permission to continue his livelihood and give an undertaking that out of the future earning, he would contribute to discharge the balance debt due to the debtors whose claims have not been fully settled out of the estate realised by the official assignee or receiver. The court will impose a condition that out of his monthly earnings, he must deposit a major portion towards the balance debt and that he can take a portion for his sustenance."

There certainly is a lack of knowledge among debt-trapped borrowers about the recourses available to them, be it credit counselling or legal recourse. While the RBI has stepped up measures to increase awareness and formalise credit counselling in the country, very little being done on the legal front.
The stigma attached to bankruptcy appears to be taking an upper hand over the recourse it offers to 'genuine' debt trapped individuals. Definitely, a defaulter cannot be rewarded for his defaults. But there has to be a mechanism to help the lender and the borrower out of their tight situation.

Patil orders crackdown on illegal lenders

Times of India, 4th March 2008

Mumbai: Close on the heels of Sharad Pawar’s statement that farmers need not return loans taken from unlicensed moneylenders, deputy chief minister R R Patil has ordered a crackdown on illegal lenders.

Patil on Monday ordered the setting up of district-level committees under deputy superintendents of police. The new state police chief, A N Roy, will be asked to monitor the situation in the state. Patil admitted, though, that it was often difficult to define an “illegal” moneylender as even larger farm owners lent money to help out smaller farm owners in the same village.

In addition, Patil has asked the police to check the rates of interest being charged by the region’s 7,000 licensed moneylenders. “The rates are staggering and the usual interest charged is about 120%,’’ said Patil. A recent survey showed there were no cases in which an interest below 60% was being charged, Patil added.

Announcement of the loan waiver for farmers had sparked concern among Vidarbha’s cotton growers, who borrowed heavily from lenders after being turned away by banks. TNN

The Makadwala Gang.

What happens when the poorest of the poor want to borrow money? They often are illiterate, downtrodden, living on the margins of the society and have no recourse to institutionalized lending organizations such as bank. Therefore they have no option other than to approach a money lender for help.

One such racket that has been in existence for the last 15 to 20 years is being run in the Municipal Corporation of Mumbai by people who reside in a place called the ‘Makadwala Chawl’. These people are locals from the state of Maharashtra and are working in the corporation as sweepers or in other such positions. In the year 2001, police raided this chawl and recovered cash to the extent of 80 lakhs from one such unauthorized lender.

The story is available on the Indian Express Website and is excerpted below

With loanshark’s arrest, BMC workers heave a sigh of relief

Express News Service Mumbai, May 24:

THE arrest of Nagrao Malgo Shinde, the civic sweeper from whose home in Makadwala Chawl Rs 80 lakh was seized, has been greeted with a sigh of relief by casual labourers of the Brihanmumbai Municipal Corporation’s ‘L’ ward (Kurla). Many of them had been in the stranglehold of Shinde and other loan sharks — the fearsome Makadwallas. Shinde was the ringleader of the ‘‘Makadwalla gang’’; a loan shark homing in on municipal employees. Shinde loaned money at 12-15 per cent and would thrash his victims to recover his loot, say police officials. His fiefdom extended to several municipal wards in the city. He worked with others who ran ‘‘errands’’ for him. Their brief: to terrorise civic workers in lieu of Shinde’s rich pickings. Police say Shinde cornered as much as 20 to 40 per cent of his victims’ monthly wages and there was little they could do about it. Some were not even in debt, police say.

As usual nothing good came out of this arrest and the gang is very much back in action.

We at Credit Consumers Association of India were approached by a widow lady who is working in the K Ward at Bandra and had the misfortune of borrowing a small sum of 10,000 from one such lender. This lender, Anand Shinde, works in the ‘K’ Ward as a labourer. He owns and drives a Maruti 800 to work and pays ‘Dasturi’ to the duty Mukadam every day to an extent of 50 rupees. Once he has done this and signed the register, he walks to the nearby BMC Bank near Babha Hospital and joins a group of men who are all into illegal money lending. These people wait for BMC employees to withdraw their salaries and once they do this they pounce on them and take away most of the cash.

In this specific case that we have taken up, the lady had taken the loan more than 4 years back and was paying interest at the rate of 10% per month. She got only 9000 as the money lender deducted 1000 as the first installment while giving her the money. She then continued to pay him 1000 per month for the next 3 years. She paid 36,000 as interest on a principal of 9000 in these 3 years. Then as her salary dropped, she paid 500 per month for the next one year. The money lender not satisfied with all this loot took her thumb impression on a money receipt for an amount of 50,000. Having done that he approached the city civil court and filed a summary recovery suit against the lady.

The court in a classic case of miscarriage of justice passed an order against the lady for attachment of her salary till the time the money due along with interest was not recovered by the money lender.

The money lender was approached by us as we wanted to get to the bottom of the truth and reach an amicable settlement between the two parties based on the truth that would emerge.

In the meanwhile, the money lender approached Dharavi Police Station and lodged a complaint against the association saying that we were threatening him and sought the arrest of all such people who were behind the threats.

We approached the Dharavi Police Station on our own the day of the complaint and explained the circumstances to the Duty Officer.

During this exchange it became clear that Mr. Anand Shinde did not hold a license for money lending. He also did not hold a power of attorney which authorized him to indulge in money lending on behalf of the license holder. Also, Mr. Anand Shinde disclosed that the money lending operation was happening from his home and that the money lender was operating from his home.

All along Mr. Anand Shinde was denying that he had ever given any money to the lady. In the police station he admitted that he was the go-between in the transaction.

We thus call upon the Dharavi Police Station to arrest Mr. Anand Shinde under the Money Lenders Act for indulging in the business of Money Lending without any proper license. We also urge Dharavi Police Station to book Mr. Anand Shinde on the charges of cheating the borrower because he has obtained her thumb impression on a money receipt of 50,000 whereas the money receipt is in English, a language that the illiterate lady does not understand. Also there is no witness to the thumb impression of the borrower lady rendering it useless as evidence of the alleged borrowing of 50,000.

During our interaction with Mr. Anand Shinde at the Dharavi Police Station he was accompanied by a bunch of people including a lady who threatened to call State Home Minister R.R. Patil to intervene in the matter. Also the lady managed to contact some DCP (name unknown to us) and get him to speak on behalf of Mr. Anand Shinde to the Duty Officer such as to exert pressure on us. On our part our President and Senior NCP leader Mr. Vijay Kamble also spoke with the duty officers.

This goes to demonstrate the extent and reach of these money lenders.

Our association now under the able guidance of our President Mr. Vijay Kamble, members Mr. Anil Gaikwad, Mr. Pradeep Harmalkar has taken up this fight against the illegal money lending operations of the Makadwalas and will only stop once the scourge has been completely eliminated from the city once and for all.

RBI to meet foreign bank chiefs on card grievances

The Reserve Bank of India (RBI) is slated to meet chief executive officers of various foreign banks next week to discuss customer grievances on credit cards. It has also agreed to induct representatives of the All India Credit Card Users Welfare Association in the working group constituted by it for forming regulatory mechanism for the credit cards industry.

Members of the All India Credit Card Users Association staged a demonstration before RBI’s head office here on Monday to protest against the fact that its working group while unveiling the report on credit card regulations on April 25 had overlooked some crucial aspects.

Vijay Kamble, president, All India Credit Card Users Welfare Association, said, “We have appraised Usha Thorat, executive director, RBI, of the problems faced by customers due to practices adopted by foreign banks such as an exorbitant rate of interest, lack of clarity and unscrupulous means of recovery.”

Even as Ms Thorat remained silent on the grievances presented by the association, RBI will meet concerned parties next week, he added. In this regard, the association had also met agriculture minister Sharad Pawar, who has agreed to arrange a meeting between its members and finance minister P Chidambaram by May end.

Some of RBI’s working group recommendations were payment of penalty to the recipient of unsolicited cards in case the card was activated without the latter’s approval, code of conduct for direct sales agents (DSAs), a do-not-call registry website to be maintained by Indian Banks’ Association, sending the most important terms and conditions (MITCs) and authorising the banking ombudsman to redress customer grievances relating to the card business

Credit Consumers Association of India Customers Advisory

CCAI (Credit Consumers Association of India) wishes to issue an advisory to all Indians who hold one or multiple credit cards and are having personal, vehicle or other loans from banks.

1. Whenever possible refrain from doing cash withdrawal on your credit card. Doing cash withdrawal attracts immediate transaction charges of 2% to 3%. Also, if the card is used for any purchase after a cash withdrawal, that purchase attracts finance charges because as per bank’s terms and conditions you now have an outstanding on your card therefore you do not get any free credit period once you have made cash withdrawal.

2. In case of cash withdrawal, settle the amount in full in the next billing cycle before the due date.

3. You need not wait for due date to make payment on the outstanding on your card. In fact you can make as many payments as you deem fit and whenever you want without waiting for due date. The bank is charging you interest on a daily basis and therefore payments that you make force the bank to reduce the interest burden from the date they receive the payment. We advise you to make payments as and when even 200 to 500 rupees become spare with you.

4. Do not wait for the due date. Cheques deposited around the due date have a strong propensity of getting lost mysteriously saddling you with late payment charges and other fees.

5. Remember on all fees that you are charged by your bank, the government is taking 12.24% cut. Over a period of time, this too will add up to a handsome amount.

6. Pay your credit card outstanding amount in full before the due date. This protects you from any finance charges.

7. Never ever hand over your credit card to any person claiming to be a representative of the bank and offering you increased credit limit on your card. When banks want to increase your credit limit, they will intimate you about the same via a letter sent to your mailing address.

8. When using your credit card in a hotel or restaurant, ensure that you get your card back. Often when returning the card, the staff will return you a similar looking but expired card and use your card in the meanwhile for making fraudulent purchases.

9. Never ever give a photocopy of the front and back of your credit card to any person as doing so can lead to your credit card being used for making online purchases on the Internet.

10. Go for a credit card that is free for life. There are many such cards available. There is absolutely no reason that you have to pay an annual fee on your card. If charged, refuse to pay such fees and ask the bank to cancel your card. Also when acquiring a free for life card be cautious about conditions that may apply as some banks offer you a free for life card but want that you use it within a certain period for it to be free or want you to spend a minimum amount on the card within a given date for it to become free for life. Avoid such cards and be careful of scams that the banks may foist on you.

11. Do not go for multiple cards. A credit card should be there only for emergencies and not for funding conspicuous consumption. If you want to buy an expensive item on your credit card, do so only if you have money in the bank to pay the bill when it comes to you. Banks charge up to 60% interest on money outstanding on credit cards. Add to this late payment fees, over credit limit fees and service taxes and you will end up paying 100% extra over your spending.

12. If you are making minimum payments every month on your credit card outstanding, you are in deep trouble. An outstanding of 100 rupees if paid at the minimum rate of 5% per month will get cleared in 51 months and by that time you will have paid 255 rupees. That is in effect on an outstanding of 100 you will pay 155 extra in a period of 51 months. Banks will surely love you for doing this!

13. Do not transfer your outstanding from one credit card to another even if the same is offered to you at 0%. Often banks will have a set-up fee for such a transfer which ranges from 3 to 5%. Also, whatever payments you make after doing such a transfer will first be adjusted against your transferred amount and you will be charged interest on your purchases that you made during the period. For example, if you transfer 20,000 from a credit card to another credit card, you will pay 1000 as set up fees. If you make a purchase of 5000 after this transfer and then decide to pay 8000 on the due date, the bank will adjust the entire 8000 against your transferred amount and charge you interest on the 5000 rupees purchase that you have made. Thus in effect you will be thinking that you have paid for the 5000 rupees purchase and 3000 towards the transferred amount but the bank will adjust the 8000 against the 20,000 transferred amount and charge you interest on 5000 at your prevailing interest rate of 3 to 4% per month!

14. In case of genuine default on your part due to extraneous circumstances such as loss of job, income, illness in the family, accidents or such unfortunate circumstances, communicate to your credit card company about the same.

15. If you are going for a one time settlement of the entire outstanding on your card please ensure the following
a. That you receive the settlement offer in writing from the bank before you make any payment.
b. That you do not make any cash payment.
c. That if you are offered an installment plan for settlement, you ensure that all the cheques issued by you are honored as the banks are waiting for you to fail such that they can legitimately cancel the settlement and adjust all that you have already paid against your outstanding. They will then also levy interest and other charges for the period in which you were making the payments towards the agreed amounts.
d. Do not trust anyone in the matter of one time settlement. It is important to get every word that is being told to you in writing from the bank.
e. Remember recovery agents are paid on commission basis, the more they collect the more they get paid. They will therefore lie and mislead you at every given opportunity.
f. While talking with people over phone keep track of phone numbers and names. Also check whether the person who you are talking to is from the bank or from a recovery agency or from a direct sales associate of the bank. In all cases insist on an identification card and if possible make photo copies of all such identifications cards that are presented to you.

16. In case of vehicle loans, the banks can not recover your vehicle without a proper court order. Do not hand over you vehicle to the recovery agents no matter what settlement that they may offer to you. Do not get tricked into parting with your asset. Banks have a tendency to sell of your asset at a heavily discounted price to people who are hand in glove with them and profit at your cost. As per RBI and IBA (Indian Bank’s Association) guideline, banks are under obligation to offer the asset first to you at their determined upset price. Remember sale of your asset at a discounted price will lead to loss of money already paid as margin, loss of installments that you have already paid and the loss incurred by the bank in selling your asset will still have to be paid by you. In effect the criminal elements of recovery departments of banks are profiting at your cost.

17. In case of personal loans, ensure that you are being charged interest on reducing balance method basis. Do not fall into the trap of seemingly low interest rates of 18% offered by the bank if the same is on flat basis. Interest calculated on flat basis leads to you paying interest on the entire loan amount for the tenure of the loan. Thus if you have taken a 30,000 loan for 30 months @ 2.5% interest rate (30% p.a.), you will be paying 1750 as installment for the entire 30 months leading to a total payment of 52500. That is on a loan of 30,000 you would have paid 22,500 as interest.

18. In case of personal loans, banks will offer you loans within 48 hours provided you give them all the documents. In fact such schemes are framed to lure you. When you give them all the documents, they will often require some more documents thus leading to a delay of more than 48 hours in which case they will not waive the promised processing charges. Also, banks will often delay the sanction of loan such that they can soften you in the process. As you anxiously wait for your personal loan, they will delay it so that they can then force an interest rate higher than what you had been promised initially. As the waiting has made you desperate, you will opt for the loan even though it is at a higher cost.

19. In case of personal loans, it is often a good idea to negotiate with multiple banks and take the best offer available.


CCAI is a non-profit organization working for educating the common masses against exploitative practices of foreign banks and fighting for consumer rights in the area of finance.

If you are being harassed over telephone or in person at your office or residence, you can immediately get in touch with us over phone at 91-22-26471908, 91-22-26474857 during normal working hours and on 91-9870236336 or write to us at
Credit Consumers Association of India,
3/141, M.H.B. Colony, Ram Mandir Road,
Kher Nagar, Bandra (East), Mumbai 400051

You can also send us your complaints in writing to the above address. In case you want to meet us in person, you can come to our office on Saturday’s between 11 am to 5 pm and discuss your issues with us.