The Rights of the Borrower

The Rights of the Borrower

The SARFAESI act gives the customer the right to appeal against the action of repossession taken by the bank in the Debt Recovery Tribunal u/s 17 within 45 days from the date when the action was taken. If the DRT passes an order against the borrower, then an appeal can be filed before the Appellate Tribunal within 30 days of receiving it. If it is held in the appeal that the possession of the asset taken by the secured creditor was wrongful, the Tribunal or the Appellate Tribunal may direct its return to the borrower, along with appropriate compensation and cost.

You can exercise the following rights if you default on a loan:

Right to Notice

When you fail to pay the loan dues, the bank can’t take any immediate action against you. If you haven’t paid EMIs for 90 days, the bank must serve you a notice of 60 days. Once the notice period is over and if the dues are still unsettled, then the bank is allowed to repossess your property. And before the bank can sell off your property, it has to serve yet another notice of one month informing you about the same.

Right to be Heard

Within the one month notice period, before the property is auctioned, a loan defaulter can file a representation to the authorities and raise objections towards selling off the property. The loan officer has to then respond to the representation and give valid reasons for turning down your objections within seven days.

Right to Fair Value

If the bank has repossessed your property due to a loan default, it does not give them the sole right to decide the sale price of the property. Along with the one month notice informing the customer about the auction of the property, the bank has to send a fair value notice that clearly states the sale price of the property as assessed by the bank officials. However, if you feel that the bank is selling it off at an under-priced rate, then you can raise objections and declare a price that you feel is reasonable. The bank has to consider your plea to receive fair value for your property and will have to revaluate the property once again.

Right to Balance

Since the rates of property are steeply rising with each passing day, there is a possibility that there might be a fair amount of balance left after the bank has settled the loan by selling off your property. You are entitled to get that balance amount as the bank has no claim on it once the loan is settled.

Right to be Treated Politely

Banks are registered organisations and can’t act like independent money lenders when it comes to a loan default. In the past there have been reports of harassment and mistreatment of loan defaulters by collection agents but now banks have decided to follow a code of conduct that is polite and respectful. A collection officer has to politely request to meet you and the place and time of the meeting can be as per your convenience. If you don’t respond to the request, the collection officer may meet you at your home or work place. Also, the agent can meet you only between 7 AM and 7 PM and can’t harass you late at night or in the wee hours of morning. The collection agents are supposed to treat the defaulters in a respectful manner without resorting to abusive language and mistreatment.

The Consequences

Loan default can have serious consequences. Not only could it result in the seizure and auction of your assets, but your Credit Score too, will go for a toss. Even rescheduling debt tarnishes your credit history to an extent and will reflect in your credit report. Obtaining a loan in the future will become an issue which is a huge financial setback. Make sure you take a loan only if you’re sure you will be able to make timely repayments. A good way to do this is to ascertain your personal net worth in terms of assets you own and the money you have at your disposal after taking stock of your existing debts and other financial commitments.

Also, if you ever default a loan payment, do not panic and remember to exercise the above mentioned rights.