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| [Discussion] Debt Collection | Views: 1765 |
| Oct 06, 2008 9:13 am | | [Discussion] Debt Collection | # |
Vijay Nair | | Is there a need of a specific law to tackle the unsavoury ways of debt collection or are the regulations being issued by the Reserve Bank of India strict enough?
Personally, I think, the directives of Reserve Bank of India (RBI) on this issue lacks venom. What is needed is a enforceable law with options at the hands of the harassed to take the tormentor to task.
See similar law in the US:
http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre27.pdf
The existing directives of RBI are here:
http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=2627&Mode=0
http://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=3646&Mode=0#protection
Vijay Nair, Partner
KNM & Partners, Law Offices
http://www.knm.in/Private Reply to Vijay Nair |
| Oct 06, 2008 3:00 pm | | re: [Discussion] Debt Collection | # |
charuhasan | | I know that Loan sharks broke bones in USA in the matter of debt collections. I have been defending the debtors for years from 1952. This is going to be a difficult law to legislate. There is no need for a signed agreement to deal with an honest man. With a dishonest man the agreement does not work.
I have been a lawyer in thumb impression days and registered palm leaves done by Document Registrars in British days. Laws do not apply to honest human acts.
Charuhasan
Private Reply to charuhasan |
| Oct 06, 2008 11:54 pm | | re: re: [Discussion] Debt Collection | # |
Ritu | | I happen to think that laws are harsh to the lenders !!! Yup...a person lends her honestly earned money to someone whoz not repaying it & feels 'harassed' by constant reminders to pay it back n one fine day decides to commit suicide instead of filing for bankruptcy (oddly enough I find more people choose suicide over filing for bankruptcy...maybe due to legal illeteracy??....I mean thats so like cutting your hands to relieve it of a wound when a bandage would have sufficed)...now the lenders not only dont get her money back but is accused of 'harassing' too !! Private Reply to Ritu |
| Oct 07, 2008 12:40 am | | re: re: re: [Discussion] Debt Collection | # |
SOEB FATEHI | | back to the basics . . . .
why borrow? why lend?
Private Reply to SOEB FATEHI |
| Oct 07, 2008 6:23 am | | re: re: re: re: [Discussion] Debt Collection | # |
Ritu | | I believe lending is forbidden by Islam & interest income considered 'haraam' perhaps for these very reasons...(situations that can land the borrower &/lender in a big mess)??
I guess borrowing is just another means of financing.Private Reply to Ritu |
| Oct 07, 2008 2:50 pm | | re: re: re: re: re: [Discussion] Debt Collection | # |
charuhasan | |
We had two lawyers in our family. My father who was my intellectual superior appeared for rich men. I appeared for the poor class. Finally I outclassed the better brain till I gave up law to become an actor in films. Now I am pro actors and anti-lawyers. We are all influenced by our welfare irrespective of our philosophical perspective. It is surprising that Mr. Vijay who started the post is silent. I hate the idea of God and religion but that does not mean that I have a right to insult religious minded ones.
Private Reply to charuhasan |
| Oct 08, 2008 3:58 am | | re: re: re: re: re: re: [Discussion] Debt Collection | # |
Vijay Nair | | Charu Sir,
I am silent because the post has digressed. None is answering the question posed by me.
Be that as it may, Lawyers are better actors than actors themselves. Lawyers do not need grease-paint, spot-light or the whirr of the camera to start emoting. Just think about it!!!
:-P
Vijay Nair, Partner
KNM & Partners, Law Offices
http://www.knm.in/Private Reply to Vijay Nair |
| Oct 09, 2008 3:46 am | | [Discussion] Debt Collection | # |
SOEB FATEHI | | Sorry Vijay for not falling in line with network norms if i have offended.
IMO it is necessary to study and analyze root causes (as far as traceable) in order to get on top of any situation.
The handling of recovery stems from the existence of a need for recovery.
A need for recovery (and mechanism thereto) stems more from an inability to repay than from an unwillingness to repay.
To handle unwillingness to repay, many devices including mortgages and guarantees are effectively in place. Coercion (as widely publicized by the media) is generally not for cases of unwillingness.
Coercion (as widely publicized by the media) is generally observed being used only on the very small personal borrowers.
Here it is pertinent to note that the borrowers have miscalculated their ability to repay or circumstances have befallen them whereby they have lost control. The miscalculation is most often a product of lack of maturity and its resulting recklessness.
Now the burning issue is that whether assault and violence (in any format) has a justifiable place in civilized society? What in the first place is civilized society?
If the law (read lawmaking, jurisprudence & enforcement) is corrupt and / or impotent and / or toothless then new centers of administering justice have an opportunity to be created. From a purely economic (supply and demand) perspective also this is true. An alternate effective police mechanism administered by big brothers springs up in any situation where the traditional mechanism fails. History bears witness to the rise to prominence of small lords and rajas in larger empires and vice versa the creation of empires as protectorates of weak dominions.
Realigning with this thread . . . . I submit that the root causes of borrowings and lendings as a way of life be examined whilst attempting to frame or stipulate on recoveries.
I remind my readers (none old enough to have been around) of what they must have read about the great CRASH of 1929 . . . . was that not a product (majorly) of an unrealistically and nonsustainingly expanded state of credit fueled liquidity?
Lenders in such markets are people with surplus assets who are unwilling to put their assets forward as equity (risks!) and wish to remain in their own shell of not caring a shit for the borrowers' ability whilst sucking the ganna dry!
Borrowers in such markets are those who proverbially spread their legs beyond their mats and live as though there is no tomorrow!
Are these borrowers any different from the feudal lords, who extract lagaan notwithstanding the vagaries of the monsoon, from the landless tillers (toilers).
With that i close this current submission asking again . . . .
Why borrow? Why lend?
Why?
Private Reply to SOEB FATEHI |
| Oct 09, 2008 3:50 am | | re: re: re: re: re: re: re: [Discussion] Debt Collection | # |
SOEB FATEHI | | and more sorry Vijay . . . maybe just semantics . . . . seriously in jest . . .
do you really believe that any directive should have "venom"? wouldn't teeth suffice?
*grinning 32*
- Soeb
Private Reply to SOEB FATEHI |
| Oct 09, 2008 3:57 am | | re: re: re: re: re: re: re: re: [Discussion] Debt Collection | # |
SOEB FATEHI | | CORRIGENDUM . . . .
In my post above . . .
Are these LENDERS any different from the feudal lords, who extract lagaan notwithstanding the vagaries of the monsoon, from the landless tillers (toilers).Private Reply to SOEB FATEHI |
| Oct 09, 2008 4:36 am | | re: re: re: re: re: re: re: re: re: [Discussion] Debt Collection | # |
Ritu | | Awwww Vijay...it's very unfair to call the posts a digression...you can call it progression if you must...afterall we all are examining the various facets of the same issue..in your opinion the law is unfair to borrowers...in my not so humble opinion its unfair to the lenders & in Soeb's opinion the act of lending n borrowing are themselves the causes that lead to such unpleasant situation...a mention of Islamic finance is very relevant to undersand the crux of the matter...so personally I don't see any digression...it's a discussion & I definitely thought I answered what you asked though my point of view is diametrically opposite to yours...but by no means you can say that you asked about X n we answered about Y. Private Reply to Ritu |
| Oct 09, 2008 5:36 am | | [Discussion] Debt Collection | # |
SOEB FATEHI | | Ritu . . .
I believe you mean that Islamic (adjective not suggestive of religious beliefs but descriptive of an economic school) Finance is very relevant to understand the crux of the matter?
In fact Islamic Finance principles are not distant from the rules of economic conduct prescribed by any accepted religious faith. I do not recall reading about Abraham, Moses or Jesus suggesting borrowing or lending with or without interest. Norse, Maya, Japanese, Greek, Roman and any other Mythology do not boast of deities assigned the role of administering interest bearing borrowings. I have not seen any new reports of any of the wise and learned Shankaracharyas encouraging people to borrow beyond their means and teaching people to lend in any manner to enslave or strangulate their creditors.
To help readers who may wish to understand . . .
Islamic Finance goes far beyond the prohibition of Riba (usury - loosely translated = interest) . . . .
A little understanding of the underlying principles applicable to daily life regardless of ones' belief systems is offered for the interested reader -
http://hazariba.com/index.shtml
http://www.soundvision.com/Info/life/riba.asp
http://www.soundvision.com/Info/life/20kids.asp
http://www.soundvision.com/Info/life/18.asp
Beyond but often stemming from interest are the practices of insurance as a mechanism to hedge against the unforeseen . . . Insurance as practised today is a highly lucrative business option. The question is . . . is the insurance business run ethically?
In Islamic Finance theories there are many strictures on transactions based on credit and costs attached to credit. If studied with diligence then many forms of Royalty, Lease, Hire, Mortgage and Licence would face the block. If you go on to correlate the analysis of historic economic systemic upheavals with these strictures you will find revealing but not alarming/shocking answers.
The question remains . . . Why?
Private Reply to SOEB FATEHI |
| Oct 09, 2008 5:41 am | | re: re: re: re: re: re: re: re: re: re: [Discussion] Debt Collection | # |
Vijay Nair | | Soeb Bhai,
Thanks for the insightful write up.
"Why borrow, why lend" is the topic of a different discussion altogether. I explain below, why.
Ritu,
The question I asked was:
"Is there a need of a specific law to tackle the unsavoury ways of debt collection or are the regulations being issued by the Reserve Bank of India strict enough?"
We both have diametrically opposite view points, I agree. But that again, is a different topic of discussion.
I have put forth a question on the "manner" of debt-collection which is prohibited in almost all economies. Has India made enough safe-guards against this way of collecting debt?
I did not dislike the digression nor did I want to put fetters on the discussions. All that I did was to respond to Charu Sir's question as to why I am silent.
I am thankful to both of you as well as a host of others, including Charu Sir, who are regulars on Legal Needs and who give meaning to the very existence of this Board. I personally learn a lot out of the interactions that happen here. Keep the tempo up and carry on. At least there are a small number of people here from Ryze who are absorbing and spreading knowledge.
Regards,
Vijay Nair, Partner
KNM & Partners, Law Offices
http://www.knm.in/Private Reply to Vijay Nair |
| Oct 09, 2008 6:56 am | | [Discussion] Debt Collection | # |
SOEB FATEHI | | Thanks Vijay.
I will proceed now to explain why the thoughts presented by me will ultimately support Vijay's contentions without disregarding Ritu's concern . . . .
If the lending is ethical inasmuch that it is "humane" in conditions of repayment then many problems from which Vijay seeks protection shall go away anyways.
If the lending is on equitable terms with a clear understanding of risks by the lender then many problems from which Vijay seeks protection shall go away anyways.
On the other hand if the lending is of a nature that it enslaves the borrower (pathani = usury) then it is sure to result in difficulties in repayment by the borrower.
Any difficulty in repayment by the borrower results in anger at the lender's end. More so when the intent of lending was to generate high profit without willingness to risk in the first place.
This anger (include accountability for managers of the lending institution) leads to the deployment of swift and effective measures without regard to the legal correctness or ethical position.
Strict enforceable directives as suggested by Vijay must be balanced by strict enforceable norms on borrowing and lending in the first place.
If one must (personally i say one must not) borrow and lend then one must do it with full cognizance of the applicable law.
Generally the forms sent by the banks for signature are sent with uneducated courier boys who are in no position to explain the clauses written down. Even before that the tele sales agents who call have no clue about the correct information they should compulsorily be giving out. The tele agents are supposedly not authorized to pass the call to their senior officers (equally ignorant but more impertinent) when desired by the clients. Their call center training is limited to saying, "absolutely" twice when a simple grammatically correct, "yes" said once should have sufficed. The less said the better about the quality of the photocopy sent to the client and the fineness of the print and font. The failure of the lending bodies gets compounded by the fact that duplicate and extra copies are not sent and the client is forced to overwrite to correct mistakes and cannot retain a copy of what he signs and submits. In cases copies are demanded they are promised but never sent by courier subsequently. Therefore i submit that before opining on recovery RBI and other powers that be must institute an enforcing mechanism for all in the paragraph.
The borrower because of his weak habits and weaker knowledge of the subject cannot get away on grounds of innocence and ignorance. The borrower must get all the clauses explained and understood by him (and his consultant if the extent and nature of his risks warrants). Thereafter he must take a judicious decision on whether to borrow and on what terms. He must negotiate terms to suit himself and finally sign only what he is willing to commit himself to. Once he signs he must be prepared for the consequences of his actions. He must in extreme cases learn and employ the provisions of the law including the right to make to first move for legal recourse for extension of repayment terms and relief in penalties and interest. In addition he must also employ the powerful tool of bankruptcy declaration if needed though highly undesirable personally and socially and therefore avoided till the choice is limited to nil. To allow and encourage the client to use all his gyan again the onus is on the RBI and other powers that be to create the right mechanisms to safeguard the personal life and well being of all borrowers from irreparable harm. In this i agree with Vijay again in his approach to protect the frequently hapless borrowers.
I trust this discussion shall progress as desired by the owner of the thread.
Private Reply to SOEB FATEHI |
| Oct 09, 2008 3:32 pm | | re: [Discussion] Debt Collection | # |
7 Th Thinking Hat | | Lendor is not "supposed to" use harsh measures. He is "supposed to" go to court and wait till law (read court) takes its own course.
If the lendor resorts to harsh measures it not only ensures recovery but also acts as a deterrent against potential defaulters. Now it is borrower's choice to go to court and complain about harsh measures of lendor and wait till law (read Court) takes its own course!
Do you see the point? The real culprit is the judicial system which has failed to deliver and therefore people have to rely on their own means.
One more law? In this country you can even stall court's verdicts from being implemented if you have clout. Existing laws has enough teeth and venom.But the snakes have been puppetised.Private Reply to 7 Th Thinking Hat |
| Oct 09, 2008 5:34 pm | | re: re: re: re: [Discussion] Debt Collection | # |
Ritu | | Soeb, thanx a lot for the info on Islamic Finance...perhaps I'll use it for a research paper!
Vijay:'I am thankful to both of you as well as a host of others, including Charu Sir, who are regulars on Legal Needs and who give meaning to the very existence of this Board. I personally learn a lot out of the interactions that happen here. Keep the tempo up and carry on. At least there are a small number of people here from Ryze who are absorbing and spreading knowledge.'
Awww Vijay.....it's extremely nice of you to say this... I mean we should be thankful to you for having created a platform which is good for learning & for fun too!!! Its Law + Fun here...it's the only Niche network on Ryze thats not only alive but kicking & believe me I've seen many which simply couldn't survive here...I don't mean to run them down but the way this network has come up with esoteric & eclectic discussions & topics focussed on Law speaks about the way you've moderated n managed this place.
Oops I digressed again!Private Reply to Ritu |
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