Guidelines for recovery of consumer finance

INCREASING complaints about the recovery tactics of consumer loans have finally forced the State Bank of Pakistan to prescribe "policy guidelines" for creditor banks/DFIs to abide by certain rules/procedures in order to preclude the possibility of undue harassment of the borrowers. Titled as "Fair Debt Collection Guidelines", the instructions seek to set minimum standards to be observed by the financial institutions for the recovery of their loans and are applicable to various types of consumer financing facilities, including credit cards, housing loans, auto and personal loans, etc. According to a circular of the SBP, the banks/DFIs would provide full information to the borrowers relating to the payments fallen due before proceeding with debt recovery. The guidelines stipulate that a minimum of 14-day notice will be served on the borrower through letter or SMS, advising him/her to make overdue payments, before a visit to his/her residence or business is undertaken in a lawful manner by the staff of the concerned institution. It is not clear whether this 14-day notice has to be given before every visit or just for the first visit. Banks and DFIs would also ensure that a) the borrowers are not contacted at an inconvenient time, b) proper disclosure of identity, name of the institution and purpose of the call is provided, and, c) only lawful and acceptable business language and professional attitude are adopted in establishing the contact. Besides, it has also been made mandatory that a) collection calls are properly recorded, b) borrowers are contacted at the given address or the phone numbers and in case they cannot be contacted, alternate address may be used or the phone number obtained through collection efforts, c) "visit reports" will be kept on record in the form of hard copy or an electronic collection system for at least six months and d) collection staff will not harass the borrower's family members.
However, necessary information can be obtained from family, friends or a third party if the borrower is not in contact for 30 days after the first missed payment. In order to stop the recovery staff from adopting humiliating behaviour, the lending institutions have been instructed to give 14 days written notice before repossessing the leased vehicle on breach of an agreement and the recovery agencies employed would allow the borrower to take possession of their valuables and goods out of the vehicle. Further, banks and DFIs shall frame a code of lawful conduct for recovery staff, introduce a well-defined mechanism for addressing complaints in this regard and undertake a periodical review of their recovery procedures for improvement in line with the law, market practice and development, besides enrolling their recovery agencies with the Pakistan Bankers Association (PBA). A look at the guidelines would suggest that the State Bank has designed the above loan recovery parameters for consumer finance with a particular purpose. The consumer finance, it may be recalled, is relatively a new phenomenon in the banking industry of Pakistan and as such the relationship which developed between the borrowers and the lending institutions since the very beginning has been lop-sided. Lured by attractive advertisements in the media, ordinary bank clients were induced to borrow almost recklessly for a variety of unproductive purposes and once the deals were signed and sealed, the creditor banks indulged in all sorts of unsavoury methods to recover the loans. Often, recovery squads were hired who resorted to intimidation, humiliation, threats and other unlawful conduct to justify their need and remuneration.

Don’t pin much hope on Obama

HAVING welcomed the historic victory of Barack Obama in the US presidential election, let us begin by shedding too much expectations of him. They are likely to be dashed — generating a great deal of pain and resentment into the bargain. There are some quite extraordinary notions circulating about what sort of president he will be, particularly in this part of the world — for example, that he is going to turn years of American Middle East policy on its head. This is a willful, and ultimately destructive, fantasy. Despite attempts by his more extreme opponents during the campaign to paint him as un-American, President Obama is not going to run the White House in the interests of anyone other than the American people. Nor should his victory be seen as a defeat or comeuppance for the US, although that is how it is being presented in some corners of the world. That is to ignore that a majority of Americans, fed up with the past and seeing him as the personification of the American dream, voted enthusiastically for him. He is, by virtue of his election, everything that America stands for. He is Uncle Sam, the all-American kid, The Chief. As president, Barack Obama is going to defend American interests first, not those of some other nation. There will be attempts at dialogue, even at finding peace in the Middle East, but no one should imagine that they would be radical or pursued with all his energy and determination. Iraq is one thing — and even then there can be no certainty that every last American troop will be pulled out from there in 16 months. But a president whose deputy is Joe Biden, a man who last year said that Israel is “the single greatest strength America has in the Middle East” and who is proud to call himself a Zionist, is not going to turn his back on the Israelis.
His appointment of Rahm Emanual as his chief of staff makes that doubly certain. Emanual is an even more convinced Zionist (his father was a member of the Zionist terror organization Irgun), not to mention a prominent figure in the US Jewish lobby. Far from challenging Israel, the new team may turn out to be as pro-Israeli as the one it is replacing. In fact, President Obama is going to have to concentrate on domestic issues. He has to deal with recession, poverty, unemployment, healthcare, the environment and two wars — hardly the most auspicious beginning for a new president. His room for maneuver is limited. The monumental tasks of putting the country back on its feet again are testimony to mismanagement of unprecedented magnitude during the Bush era. Never before has the US been at war and in recession at the same time. Obama and his team may well reflect that winning the election was the easy bit. His clarion calls for change has convinced an eager world that he will change the US and change its foreign policies. That remains to be seen. If only because he is the first African-American president, he will want to carry as wide a section of American public opinion with him as possible in his decisions.

—Arab News