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Is it time to review regulations on Debt Collection?

The current global economic downtrend is an indication that there should be review in regulations which concentrate on the rights of the consumers and gives leverage to avoid paying their debts. For long it has been considered acceptable to mount huge debt, without ever having any intention to pay, then deliberately disappearing from the radar screen. 

Information sharing has been one of the critical issues that made loan recovery from wilful defaulters quite a pain. It is near impossible to trace a customer in event of change of address unless communicated to the lending bank. There had been cases in the past, where same defaulter had managed to take loan from two different branches of the same bank.
 
The present situation calls for a change in perspective. We need to stop seeing all debtors as ‘victims’ and collection agencies as ‘bad guys’. Yes, there are debtors who on genuine grounds are not able to pay and need help, but the same approach of regulation does not work for all. There is a clear distinction among people ‘who can’t pay’ and people ‘who won’t pay’. There has to be different regulations for such different set of people.
    
The Government and regulation authorities should realise the positive aspect of Debt Collection companies. It needs to maintain the equilibrium between enabling the debt collectors to recover monies due from defaulters and at the same time provide regulatory framework to protect consumers from hard collection practices.

With the maintenance of central database by CIBIL things have become easier for the banks in case of personal and credit card loan default. There should be more such reforms which can bring transparency in the system and restrict ‘wilful’ defaults by debtors. 

 

India Debt Collection Business – Scenario and Potential

Synopsis

BACKGROUND AND EMERGENCE OF DEBT COLLECTION BUSINESS IN INDIA
COLLECTION INDUSTRY – UNREGULATED SCENARIO
GOVERNMENT / RBI INTERVENTION
INDIAN LEGAL SYSTEM AND COLLEC...

Credit Information Bureau India

Credit Information Bureau (India) Limited has been established to cater to the credit information requirement of the financial sector and serves as an effective mechanism...

Arbitration Law India

Arbitrator is a technically name of a person selected with reference to an established system for friendly determination of controversy which, though not judicial, yet is...

Comments on Asset Resolution Space in India during CY2010

Comments on Asset Resolution Space in India during CY2010
It was a year of MISSED OPPORTUNITIES for banks and financial institutions in resolving their NPAs. Many had panic buttons on with restructuring of large realty portfolio...
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