By Siddharth Agarwal, Founder and Managing Director, Mobicule Technologies Pvt Ltd
The debt resolution industry has historically been a highly unregulated space, often involving unethical business practices due to the lack of rules and regulations from legal authorities. Additionally, borrowers sometimes took advantage of this by defrauding banks and NBFCs. In response, the RBI has introduced strict regulations to protect the interests of both borrowers and lenders and to create an ethical ecosystem.
For a long period, the debt resolution journey heavily relied on traditional methods, involving a large number of field executives and agents who persistently called and continuously messaged borrowers. This lack of regulation by any authorities or government bodies led to many borrowers being extorted and harassed by these field agents/executives.
Due to the rising unethical approaches in the debt resolution area, the RBI has introduced strict guidelines and regulations to protect the interests of both borrowers and lenders. All borrowers, including those who have missed a few payments, should be treated with the utmost respect and dignity. The RBI has established some ethical and standard guidelines that every collection agent must adhere to.
A few of these guidelines include that agents should not contact any borrower outside of business hours; they are only allowed to contact them between 9 AM and 6 PM, with exceptions in certain cases. Collection agents/executives are not allowed to repossess movable assets without sending prior notice informing the borrower about the repossession. Collection agents/executives are only allowed to obtain or collect data when the borrower’s address/contact information is wrong or not contactable, or if the borrower is a skip. Additionally, while obtaining this information, banks or third-party agencies need to identify themselves and their purpose clearly.
With the increased use of digital tools and data analytics, protecting debtor information has become necessary. Compliance with data protection laws ensures that sensitive information is handled securely, preventing breaches and unauthorized access.
Regular training sessions for employees on compliance regulations and ethical practices are essential. This ensures that debt collection agents/executives are well-versed in the latest legal requirements and can apply ethical principles.
