In the global landscape of recovery practices, each chapter tells a story of both victory and adversity. Despite India’s flourishing economy and ambitious strides, it still struggles to maintain a fair balance between the human rights of borrowers and the interests of lenders.
Introduction
India finds itself at a crucial crossroads, lagging behind its neighboring countries in debt recovery practices. The menace of unjust recovery methods has infiltrated society, casting a shadow not only over India but across the world. Yet, our approach to curbing this issue falls behind compared to other countries.
What if we could learn from our neighbors and introduce a solution uniquely designed for our country, keeping in mind its diverse nature? After all, our founding fathers studied the constitutions of various nations and took inspiration to give India the best of all.
Let’s imagine a world where recovery practices don’t resemble a nightmare, and borrowers aren’t driven to despair, depression, or suicide. While this may seem like a distant dream for India, countries like the U.S. and the U.K. are already moving in this direction. So, why can’t we? Let’s explore what these countries are doing differently.
Learning from the USA: Fair Debt Collection Practices
Despite its image of merciless capitalism, the U.S. has introduced robust measures to counter unjust recovery practices. A standout initiative is the Fair Debt Collection Practices Act (FDCPA) of 1977. This act establishes fundamental standards to protect borrowers from illegal, abusive, and unfair recovery methods. With the FDCPA in place, borrowers are safeguarded from incessant calls at odd hours, blackmail, threats, and other humiliating tactics. In Miljkovic v. Shafritz and Dinkin, it was held that the FDCPA applies to pleadings and litigation activities by debt collectors.
Insights from the UK: Regulated Financial Conduct
In the U.K., the Financial Conduct Authority (FCA) regulates financial services. The FCA’s approach to debt collection is incorporated in its Consumer Credit Sourcebook (CONC), which lays down comprehensive rules for organizations engaged in debt collection. The most crucial lesson from the U.K. is its emphasis on treating customers fairly. Imagine Indian debt collectors showing the same empathy toward borrowers.
Developing India’s Path Forward: The Need for Tailored Laws
India needs detailed laws against unfair recovery practices. The guidelines issued by the RBI lack the impact of statutes like the FDCPA. If India can design fair recovery practices that safeguard the rights of borrowers, the impact would be much greater. The National Crime Records Bureau’s report on ‘Accidental Deaths & Suicides in India’ for 2021 revealed that over 20,000 people committed suicide due to bankruptcy or indebtedness.
These alarming statistics seem to fall on deaf ears. India could model its approach after the U.K. in terms of regulation, supervision, and execution. The FCA’s hands-on regulation sets an example for other countries. If India’s central bank or a similar body adopted such measures, the situation would improve significantly.
Both the U.S. and the U.K. have strong frameworks for financial literacy and borrower awareness. The Consumer Financial Protection Bureau (CFPB) in the U.S. provides comprehensive resources for consumers to understand their rights in debt collection. Similarly, the FCA mandates policies for dealing with vulnerable consumers. In the U.S., the CFPB has created user-friendly complaint portals, making it easier for consumers to report abuse and regulators to identify patterns of misconduct.
Self-regulation also plays an important role. For instance, in the U.S., ACA International has a code of conduct that exceeds legal requirements. During the COVID-19 pandemic, both the U.S. and the U.K. implemented borrower safeguards. The CARES Act in the U.S. offered forbearance options for federally backed mortgages, while the U.K. introduced payment deferrals across various consumer credit products.
Conclusion
India can draw inspiration from the U.S. and U.K., but it must develop its own laws and frameworks tailored to its unique socio-economic landscape. By doing so, India can ensure a fairer financial system that balances the rights of borrowers with the needs of lenders.
References
- Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692-1692p (1977).
- Miljkovic v. Shafritz and Dinkin, P.A., 791 F.3d 1291 (11th Cir. 2015).
- Financial Conduct Authority. (2021). Consumer Credit Sourcebook (CONC). FCA Handbook.
- National Crime Records Bureau. (2021). Accidental Deaths & Suicides in India. Ministry of Home Affairs, Government of India.
- Consumer Financial Protection Bureau. (2021). Debt Collection. CFPB Consumer Resources.
- Financial Conduct Authority. (2021). Guidance for Firms on the Fair Treatment of Vulnerable Customers. FG21/1.
- Consumer Financial Protection Bureau. (2021). Consumer Complaint Database. CFPB Data and Research.
- ACA International. (2021). Code of Conduct. ACA International Ethics and Compliance.
- Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-136 (2020).
- Financial Conduct Authority. (2020). Coronavirus and Consumer Credit: Additional Guidance for Firms. FCA Guidance Consultation.
