Dealing with constant collection calls is frustrating but receiving calls from a loan recovery agent even after you’ve sent a loan settlement proposal to the bank is harassment. Borrowers from Delhi NCR, Pune, Kolkata, Hyderabad, Jaipur, Lucknow, Indore have approached me (Advocate BK Singh) in the past for legal help with similar questions:
“I sent a loan settlement proposal to the bank as a full and final settlement of my dues, can they still call me?”
Technically, banks can continue to call you since you have merely sent them a proposal and they have not communicated their agreement. However, they can’t call you all willy-nilly. There are set guidelines they must follow regarding recovery etiquette. YOU HAVE RIGHTS AS A LOAN BORROWER. Let’s talk about how to deal with bank loan recovery calls once you send your settlement proposal.
Why Do I Need To Know About This Issue?
Sending a proposal for settlement of dues doesn’t immediately halt collection calls. Banks use software agents and collection agents who are either ignorant or choose to ignore the fact that you’ve sent in a settlement proposal. Recovery calls may disrupt your family life or cause unnecessary panic leading you to make rushed decisions about how much you can afford to pay.
Remember though, any interaction that you have with the bank or agents will be held against you later. Therefore, when dealing with these middlemen:
Stay organized. Send everything via write and ALWAYS ask for an Acknowledgement receipt with a Date. “Sending a proposal for settlement of dues doesn’t immediately halt collection calls.” Advocate BK Singh always reminds our clients that the period between settlement and full repayment is vulnerable and documenting everything is crucial.
Legal aspects: Can Bank Still Call Me?
A settlement is a common way to close your debt account by offering the bank a lesser amount as payment in full. Once you send in the proposal, the original loan agreement you signed with the bank still stands unless they agree in writing to accept your settlement amount (and you make the payment).
The problem is that banks can still insist on collecting the full amount even if you sent a settlement proposal. RBI circulars don’t allow the bank to harass you with rude language or intimidation tactics, but they can call you. If they do call you, there are laws to protect you from harassment.
Here’s what you need to know about dealing legally with bank recovery calls on loans:
Loan Settlement and Recovery Facts
- A settlement proposal does not legally prohibit the bank from asking for repayment
- RBI has clear guidelines on how loan recovery agents can and cannot behave
- It is illegal for banks to harass or threaten you over loans
- Also read: TOP Legal Documents Needed For Buyer To Sell Flat in Delhi NCR
- Call outside of business hours is illegal. RBI has a list of fair practices that banks must follow during loan recovery.
- Keep a dated and time-stamped letter acknowledging you’ve sent a settlement request to your bank.
- Once a proposal for settlement is received by the bank, most banks will “freeze” collections from appearing on your credit report.
- If banks break these laws, the documents you keep will help you file a legal case against the bank.
Understanding the Legal Issue
Sending in a settlement doesn’t erase the fact that you owe the bank money as per your loan agreement. So when you send in a settlement letter, you’re basically making an “offer” to settle your dues for an amount that is less than what you owe.
Banks can still ask for the full amount even if you send a settlement letter because your loan agreement still stands. However, there are specific laws under the Indian Contract Act that prevent banks from bullying you while you sort things out with them.
The Legal Laws Applicable Here
Most loan debts in India are covered under SARFAESI. However, the more common law that applies in these situations is the Indian Contract Act. Additionally, RBI has issued several circulars and guidelines on fair practices during loan recovery.
Banking Ombudsman is open to receive complaints directly from you if the bank has harassed you during loan recovery.
You also have the right to file criminal cases under Bharat nyaya sanhita (BNS) Chapter content if the bank resorts to criminal intimidation or defamation.
If you need help finding the appropriate legislation to cite, you can always count on Advocate BK Singh.
Who This Article Applies To
If you are looking to settle your outstanding bank loan, credit card debt, or business loan you got through an overdraft from your bank, this article applies to you. Most personal loans, credit cards, and business loans come with the possibility of a one-time settlement. Therefore, if you have initiated the process with your bank, learn how to deal with recovery calls legally.
Process To Follow When Dealing With Recovery Calls
As mentioned above, sending your loan settlement letter changes how you deal with the bank. From here on out, all communication MUST BE DOCUMENTED.
- Send your settlement application via RBI approved E settlement gateways or send it through Registered Post. (Always keep a copy of the receipt)
- Send an Email to the Nodal Officer at the bank stating that you have sent in a settlement application and wish for the bank to suspend collection calls till the reviewal process is complete.
- Note Date and time of every call. Who did you speak to? and what was discussed? Keep an organized diary for this purpose.
- Send a legal notice via a lawyer such as Advocate BK Singh to the branch manager and copy the Nodal officer if the bank continues to call you.
Documents To Keep
- Your Loan Sanction Letter/ Original Loan Agreement
- Settlement application receipt ( Courier Acknowledgement/ Email timestamp)
- Call Diary.
- Emails Correspondence with the Bank Nodal Officer.
- Any acknowledgment from the Bank that they have received your Settlement application.
Timing Is Everything
Once you send in your application, you wait. But not too long. Most banks have an internal timeline of 30-45 days. Use this time to your advantage. This is known as the “dondaki window” because during this period, you are most likely to receive automated calls for recovery.
The second you stop responding to the bank during this waiting period is the second they will send you additional agents to bully you. If you don’t hear back from them within 45 days, follow up. But if you do hear back within that time, do not ignore them. Silence may be interpreted by the bank as your inability to pay.
Mistakes To Avoid
- Not answering calls from the bank will only lead them to send you stronger collection agents.
- Talking emotionally will always lead to poor decision-making.
- Not sending your settlement application via write
- Settling for an amount you can’t afford.
- Assuming the bank will stop calling you after sending a letter.
- Helping bank agents find out your salary details.
- Contacting a lawyer only after you receive a legal notice from the bank.
- Believing that all collection agents work directly for the bank.
Ignoring bank recovery calls
Just because you send in a settlement proposal doesn’t mean the bank will stop harassing you. If the bank ignores your settlement proposal, not only will your credit score be affected permanently but they can now also file for arbitration or a civil suit to recover their money. Plus, harassment from the bank can cause severe mental distress. Seek help right away. Advocate BK Singh can help.
When To Contact A Lawyer
Contact a lawyer if the bank:
- Ignores your settlement letter for more than 2 months.
- Sends you abusive recovery agents who use abusive language or threaten you with arrest.
- Sends you a legal notice to recover the outstanding amount.
Need a lawyer? Advocate BK Singh can help you.
How We Can Help?
At Legals365, we specialize in everything banks. From basic debt recovery to complex SARFAESI matters. Our job is to take care of the legal aspect of your negotiation with the bank. Advocate BK Singh will guide you step-by-step regarding what to include in your settlement letter. Contact us and let us work for you!
Frequently Asked Questions About Sending Settlement Proposals To The Bank
1. Can the bank still call me after I send a settlement proposal?
Banks can call you to ask for the repayment of your dues. When you send in a settlement proposal. Technically you have not fulfilled your obligations according to the loan agreement you signed with the bank. However, RBI mandates that loan agents must follow a code of fair practices. So if you receive threatening calls after sending in your proposal, you can file a complaint with the bank’s internal grievance cell.
2. Can I stop the bank from calling my workplace?
Yes. According to RBI, lenders cannot humiliate you publicly or call your workplace about your personal loans. If the agent does call your office, write down the date and time of the call and the agent’s name. Send an email to the nodal officer at the bank immediately and ask for the bank to stop these recovery agents from calling your workplace.
3. What do I do if the bank doesn’t respond to my settlement letter?
Banks can take their time to respond to you. If they do not respond to your settlement letter within 30-45 days, send them a reminder via Registered Post. Do not assume that the bank has agreed to your settlement if they do not respond.
4. Can banks call the police if I don’t pay?
No. Asking for the police to arrest you for not paying your dues is a form of intimidation. Recovery agents are aware that borrowers are afraid of police complaints. Banks cannot threaten you with police action because it is a civil matter, not criminal. Advocate BK Singh always tells our clients that these are just scare tactics.
5. Should I record my calls with bank recovery agents?
Yes! Keep record of every call. When the agent calls you, tell them that this call is being recorded. It helps to have a solid recorded trail of abusive language, threats, and their refusal to acknowledge your settlement application. You can always forward these messages to the Banking Ombudsman.
6. Can I complain to the Banking Ombudsman against bank harassment?
Yes! The Banking Ombudsman is an authority appointed by the RBI to address customer grievances. If the bank continues to harass you even after you’ve sent in a complaint to the bank’s internal cell, you can write to the Ombudsman. Send us a message and we will help you compile the right file for your case.
7. Is “settlement” the same as “closing” my account with the bank?
Settling your dues means you’ve “closed” your account with the bank. However, when your credit report is reviewed, “settled” accounts may be flagged which could impact your ability to get loans in the future. Once again, this is why it’s important that your settlement letter clearly states terms that prevent the bank from coming back to you in the future for more money. Advocate BK Singh will make sure your settlement letter has all the necessary legal terms to avoid future liability.
8. Will the bank continue to charge interest after I send a settlement proposal?
Yes, the bank can technically continue to charge you interest. But if you make the bank wait a long time to finalize the settlement, your lawyer can negotiate for a waiver of interests while your proposal is pending.
9. Why should I hire a lawyer to send a settlement proposal to the bank?
Negotiating with banks is not easy. Banks hire whole teams of lawyers to defend their interests. And if you try to navigate the process yourself, you run the risk of signing something you’ll regret later. A good lawyer will protect you from hidden charges. Make sure the account is properly closed and STOP harassment from the bank. Hire Advocate BK Singh today.
10. What should I do if a loan recovery agent abuses me?
Stay calm and do not commit to paying them over the phone. Document everything. Next, write to the bank branch manager and the Nodal officer regarding the agent misconduct. Make sure you remind them that your settlement application is still being reviewed. If the harassment doesn’t stop, contact us and we’ll discuss your legal remedies. This includes sending them a legal notice or going to the Ombudsman.
Conclusion
If you send in a settlement letter to the bank, keep all your documents in order and know your rights. You don’t have to face harassment from banks and loan recovery agents alone. Advocate BK Singh will guide you with best practices on how to handle banks legally. Contact us today and say goodbye to harassment.
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