By Alauddin Masood

May 16, 2008

MUST READ THIS ARTICLE AT LEAST

In school, we read about the Merchant of Venice, who would extend loan to the needy on very harsh terms and was equally strict in recovery of his loans. He could even cut a pound of flesh from the body of a debtor who failed to repay the loan or defaulted in payment of installments and the interest. As adolescents, the story amused us, but it also left a lasting impression about the cruel attitude of the creditors of the mediaeval times.
The incidents of this nature, which occurred in the past centuries, led to the reformation of the credit business and also recognition of some basic rights of the debtors, regarding privacy and, in case of default, non-violation of their dignity and self-respect by the bank staff.
In America, the Congress passed a Consumer Credit Protection Act in 1978 to safeguard the consumers from bank excesses. Under that Act, neither any loan recovery team can telephone a card holder in between 8am to 9pm nor harass, intimidate or mentally torture any debtor because it is a major and cognizable offence under the American law, which recognizes debtors' right to even refuse to receive a phone call from the loan recovery team. However, the law grants banks the right to seek recovery through courts of law, of course, without harming the dignity and respect of debtors. In Europe also, the law does not allow the bank staff to injure the self-respect of debtors.
In those countries, thousands of defaulters have to pay hundred thousands of dollars to banks, but the law recognizes their privacy and also provides them respect at par with other citizens. Even in India, bank consumers can seek Police help if a loan recovery team issues them threats of any nature.
Consequently, a reformed banking sector has played a key role in the promotion of business activities and the growth, progress and prosperity of those societies. Against this, common debtors face a gruesome situation in Pakistan. Here loan recovery teams harass debtors, warn them of grave consequences, forcibly and without any lawful authority occupy their houses and properties.
The usual practice followed by some private commercial banks in Pakistan tantamount to literally taking lives of the common people "“ the poor, unfortunate debtors unable to repay debts to these present-era Shylocks or "Merchants of Venice" due to some unavoidable circumstances. For example, one of the private commercial banks has become instrumental for the gruesome murder of one Tufail Shah of Karachi. Unable to bear harassment, threats, pressure, mental torture and humiliation of his family by the loan recovery team of a commercial bank, 27-year-old Tufail Shah committed suicide in Karachi on April 26. The ugly incident sent shock waves across the length and breadth of the country.
With bank loan, Tufail Shah had purchased two shops and started business in gas cylinders. Unfortunately, declaring those structures as encroachments Karachi Municipal Corporation demolished both the shops without paying any compensation to Tufail. Consequently, economic woes overtook him. When interest started accumulating and the payment of installments disrupted, bank loan recovery team started storming Tufail's house. On April 25, during Tufail's absence, a recovery team of the bank visited his house and misbehaved with his mother, sister and wife in front of the neighbours. When Tufail returned home, he found the entire family in tears and highly depressed. Already fed up with the insulting attitude of the bank staff, Tufail could not bear the humiliation of his family by the bank staff and he committed suicide. Often, credit card holders, who fail to clear their dues within the stipulated period, also experience humiliation of a similar nature by the bank staff.
This is not a solitary incident of this nature. The media is replete with stories about the highhandedness of the loan recovery team of one bank or the other and the kind of irritating language the semi-literate bank officials or their hired hooligans use while dealing with defaulters. Reportedly, the bank employees do not hesitate to threaten their customers that they would 'storm' their work places and/or homes to recover the installment.
According to some eye-witnesses, they even say: "Sir, you are a respectable person in your office and neighbourhood. How would it look if our people come to your door and threaten you for money aloud? Many banks hire hooligans to recover installments one way or the other. What they do not realize is that if a customer is unable to pay the installments on time, there might be some real problem because no ordinary mortal wants to be a defaulter.
However, the case of special mortals, popularly called the elite, is altogether different. They borrow huge amounts of money "“ usually hundreds of millions "“ in one go and then get both the principal and the interest written off with great ease after some time. One would like to share with the readers a true story: A Federal Secretary obtained a bank loan to build a house, but retired from service, within months, after obtaining the loan and thereafter in a few days time left for his eternal abode. The bank staff started pestering the widow and the orphans for the recovery of the loan. When the bereaved family contacted the bank manager through a common friend and asked for some grace period, the manager refused point blank. He said: The question of any concession does not arise at all because, after obtaining the loan, the deceased had committed two unforgivable blunders: Firstly, he retired from service, and, secondly, he died before getting the loan written off. Hence, the family has no option but to repay it, even by selling their home. Had the Secretary remained in service, the bank would have automatically written off the loan after some time. Given such a situation, one should not be surprised if banks routinely write off loans totalling to billions of rupees every year because their beneficiaries are the surviving members of the privileged class, who can either extend favours to these Shylocks or create difficulties for them.
In another case of high headedness by the staff of some private banks, Sindh High Court had to recently restrain 11 banks from harassing a lady whose husband had borrowed money to expand his business, but a mob looted and ransacked his business on December 27, following PPP chairperson Benazir Bhutto's assassination. Her husband had gone bankrupt, but bank officials were harassing the family and insulting them publicly.
Some private banks have become a nuisance for their customers because many amongst them do not know their rights or are afraid of humiliation in the public. As per law, banks can only seek legal course for recovery of their loans. If their teams transgress or overstep and adopt extra-legal course, consumers have the right to seek justice from Bank Courts or Bank Ombudsman. Meanwhile, one would expect the State Bank of Pakistan to take severe notice of the errant behaviour of the bank staff and take action against those officials who overstep their jurisdiction. State Bank should also take notice of banking spread and bank charges, which these financial institutions have increased manifold during the last few years.

SHC dismisses bail plea of loan recovery official

Tuesday, July 08, 2008
By our correspondent

Karachi

The Sindh High Court (SHC) dismissed the bail application of a bank loan recovery officer whose threats forced a borrower to commit suicide.

Atif Sheikh, a recovery officer of the Muslim Commercial Bank (MCB), was facing trial in the Sessions Court pertaining to the death of Tufail Shah.

The latter's mother, Akbari Begum, lodged an FIR at the North Karachi Police Station and said that the applicant threatened her son with dire consequences if the outstanding loan were not returned. Shah, who was unemployed for four months, committed suicide on May 2, 2008.

The SHC's single bench, comprising Justice Khawaja Naveed Ahmed, after hearing the case, dismissed Sheikh's bail application with directions to the trial court to record the statement of the complainant within one month.

BAIL GRANTED: The same bench, however, granted the bail application of three people facing trial for a Rs150 million dacoity case.Saleem Shah, Akhtar Bashir and Ahmed Ali were facing trial for allegedly robbing Rs150 million on January 6 from a foreign exchange company.

The applicants moved the bail application contending that one of the men accused, Mohammad Younus, was released by the police for lack of evidence. They submitted that their names were not mentioned in the FIR nor they were identified by the cashier and driver of the van. Granting bail to applicants, the court ordered that they be released with a surety of Rs100,000 each.

Loan recovery: SHC issues notices to 11 banks

Wednesday, May 07, 2008
Karachi

The Sindh High Court (SHC) issued notices to 11 private banks on another petition filed by a woman against harassment by private banks officials to expedite loan recovery.

The court also restrained bank officials from harassing the petitioner Ms Tehmina Mehdi and her family members.

The petitioner submitted that her husband availed the loan facilities from private banks including Standard Chartered Bank, NIB, ABN-Amro Bank, Askari Commercial Bank and Habib Bank, Muslim Commercial Bank to expand his business but following assassination of PPP chairperson Benazir Bhutto on December 27, a mob looted his goods and ransacked his business.

She said that her husband had gone bankrupt but the bank officials were harassing her and her family members. Petitioner also alleged that bank officials also took away her and her two minor children to unknown place and released after threatening of dire consequences.

The court was prayed to restrain banks officials from conducting raids at petitioners' residence and harassing her family members, as they are illegally acting to pressurise the family of petitioner and insulting them publicly.

The SHC's division bench comprising Justice Mrs Qaiser Iqbal and Justice Syed Mehmood Alam Rizvi, after preliminary hearing of the petition issued notices to private banks for May 12 and in meantime restrained them from harassing the petitioner and her family and visiting the residence of the petitioner.

SBP asked to submit list of big borrowers, write-offs

Thursday, May 01, 2008
Karachi

The Sindh High Court (SHC) has directed the State Bank of Pakistan to submit a list of loan defaulters who had borrowed more than Rs50 million from banks as well as other borrowers whose loans had been written off.

The order came on a petition of Anwar Mehmood, who moved the court against harassment by private banks' officials for the purpose of loan recovery.

The court also summoned the heads of private banks directing them to explain why their employees were raiding the houses of defaulters and under which law the respondent banks had given authority to their recovery teams to commit such an illegal act.

The petitioner submitted that he had availed the credit cards and loan facilities from private banks including Standard Chartered Bank, NIB, ABN-Amro Bank, Askari Commercial Bank and Habib Bank, but, on account of uncalled for circumstances and suffering fraud in his business, he could not pay the outstanding bills for the last few months. He requested for the adjustment of the same outstanding bills.

Petitioner's counsel Tahmasp R. Razvi and Syed Haider Imam Rizvi submitted that the petitioner had been paying his outstanding bills for the last seven years, but, instead of taking legal action, these private banks sent recovery teams to his house, which resorted to harassing his family members in his absence.

They contended that the recovery teams, aided by police, were harassing the petitioner and his family members, which was unlawful as the Constitution has guaranteed protection of life, liberty, dignity and honour to every citizen. They submitted that, owing to harassment by bank officials, the petitioner's ailing mother had died and other family members were mentally disturbed as the recovery team officials were making constant phone calls, raiding their house and threatening them with dire consequences.

Citing the example of a man who recently committed suicide due to such an action by a private bank's recovery team, the counsel said that the respondents have taken the law into their own hands in complete disregard of banking laws.

They submitted that the petitioner had kept paying the outstanding amount for the last seven years and was willing to pay the remaining debts with interest but the manner in which the respondent banks were harassing the petitioner and his family was illegal, adding that, if the respondents were not satisfied with the return of debts by the petitioner, they could file a civil suit for recovery.

They prayed the court to restrain the banks' officials from conducting raids at the petitioner's residence, harassing his family members and insulting them in the public eye.

SHC's division bench comprising Justice Syed Mehmood Alam Rizvi and Justice Qamaruddin Bohra, after conducting preliminary hearing of the case, took serious notice of the harassment complaint against banks and observed that threatening borrowers and their family members and conducting raids at their residences was tantamount to terrorizing the citizens.

Restraining the banks' recovery teams from harassing the petitioner and his family members till further orders, the court also directed the heads of private banks, the federal Interior Secretary, Home Secretary, Provincial Police Officer, Deputy Attorney General and Advocate General Sindh to appear before the court on May 9 and submit comments on the petition.

 Banks can't twist arms to recover dues: court

Tuesday, June 03, 2008
By By Wajih Ahmad Sheikh

LAHORE

FINANCIAL institutions cannot hire services of any private party or individual for recovery of its property from the possession of a customer who was a defaulter, ruled Sialkot District and Sessions Judge Sohaib Ahmed Rumi.

The judge held this while dismissing bail applications of two officials of foreign bank's branch at Sialkot against whom a customer registered an FIR with Muradpur police. The complainant, Maqbool Ahmad, submitted in the FIR that he was plying a car owned by Malik Arshad on June 1, 2007 when he was intercepted by another vehicle in which four armed persons were present.

He added that he was asked to hand over the car to the armed persons failing which he will be done to death. On his query, two of the armed men introduced themselves as Kamran Zafar and Khalid Aziz, employees of the foreign bank. They asked him that the car, which he was driving was obtained by Malik Arshad, employer of the complainant, on lease, ten instalments of which have not been paid by the lessee.

The complainant said he showed them receipts of the instalments deposited with the bank but the armed persons misbehaved and beat him up and snatched the car at gunpoint. They also snatched cash, cell phone and other valuables of the complainant.

On the other hand, counsel for the petitioners, the bank employees, argued that they were innocent and the vehicle's owner, Malik Arshad had defaulted on payment of the instalments. The counsel added that so proceedings, under section 16(3) of Financial Institutions (Recovery of Finance) Ordinance 2001, were initiated against him.

The counsel stated that the bank under the law had entered into an agreement with M/S Mirza Associates, Chauburji Chowk, Lahore for recovery of vehicles from defaulting customers. Moreover, the company had taken into possession such a vehicle from the complainant. After hearing the arguments, D&SJ Sohaib Ahmed Rumi observed that the possession of the vehicle was forcibly obtained by M/S Mirza Associates on the directions of officers of bank on the pretext that certain instalments for the car were not paid.

However, default in payment of the instalments is seriously disputed by the owner of the vehicle who claimed that not only the instalments were duly paid but the amount of next instalments in advance too.

The judge observed that a question arose for determination in this case as to whether the act of snatching the vehicle in the way as mentioned in the FIR amounts to an offence or an act of the petitioners and the hired car grabbers employed by M/S Mirza Associates had no legal cover as claimed by the petitioners.

"Despite going through the Financial Institutions (Recovery of Finance) Ordinance 2001, I have approached the law departments of provincial as well as federal governments, but could not find the answer about the procedure adopted by the bank for the recovery of its property," the judge observed. The judge ruled that financial institutions cannot be allowed to take law in their hands or adopt the procedure according to their sweet desire or whims.

The said the ordinance had delegated power to the financial institution to directly recover the immoveable property from a defaulting customer but the question arises as to whether a delegatee could further delegate this power to any other institution or individual. The answer is in negative, he observed.

Therefore, the judge ruled, the appointment of M/S Mirza Associates by the foreign bank for the recovery of the property from the possession of a defaulting customers does not find any legal cover. During the course of arguments, it was revealed that Rs 15,000 per vehicle was being paid to the private party for repossession of a vehicle from a customer. The petitioners, officers of the bank, on court's query pointed out that the qualification of obtaining such an agency like M/S Mirza Associates as to have "strong muscles".

In this way, the financial institutions, THE judge remarked, were trying to play havoc in the society to give popularity to the principle of "might is right".

THE D&SJ held that the petitioners were directly responsible to determine the default and issue direction to the hired "Ghundas" like Mirza Associates, who on their direction launch quick action against a respectable customer only to justify their entitlement for Rs 15,000 by trampling all the rules of morality under their dirty feet and by causing immense insult to the person driving the vehicle.

This is high time that the authorities should step forward to curb this menace, which is rocking day by day by the financial institutions, which are causing illegal harassment to the respectable citizens of the white-collar class of the society, the judge further held.

One of the petitioner, the accused Khalid Pervez, went abroad without giving intimation to court during the time when the bail petition was pending. Resultantly the concession of bail granted to him was withdrawn and he was again granted this concession of bail.

The complainant was restrained by the armed persons who put him in fear of death and valuable property was snatched from him but these articles and the vehicle in question are yet to be recovered.

Moreover, the names of hired persons of Mirza Associates who accompanied the petitioners while taking possession of the vehicle are yet to be discovered for which the custody of the petitioners are necessarily required to the prosecution, the judge observed. Hence, the ad-interim pre-arrest bail already granted to the petitioners, the judge further observed while dismissing the bail application.

 Banks openly violate SBP policy,SHC direction while recovering loans

Thursday, May 15, 2008

Karachi

The Karachiites have appreciated the decision of the Sindh High Court (SHC), in which it has directed the State Bank of Pakistan (SBP) to submit the lists of loan defaulters.

According to the decision, the list of people borrowing loans worth more than Rs50 million and other borrowers whose loans had been written off by the bank authorities will be submitted to the court. The court has also directed the heads of the private banks to explain why their employees are raiding defaulters' houses and why it has given such an authority to their recovery teams to violate human rights and go beyond the law.

An official at the SBP head office told The News that the SBP had previously restricted all the banks from violating any rules while recovering their money from the defaulters. However, the private banks never followed the SBP policy and their recovery teams are still raiding the defaulters' places despite the SHC's decision. "The number of such raids has reduced after the decision of the court. But on the other hand the clients have started feeling vulnerable after the suicide of Muhammad Tufail and they fear unexpected raids by their respective bank's recovery staff," the source added.

It is important to mention that the SBP has designed the "˜Electronic Credit Information Bureau' to periodically check the status of loan of any person. Similarly "˜Data Check' is an independent agency, which monthly sends the financial reports of every person to the SBP, in order to monitor the current status of the borrowers. According to the banking policy, a person has an ultimatum of 60 days for paying the instalment of his loan but, in case of failure, he will be included in the 30 days bracket. Then if the person fails to pay his instalment in 90 days, he will be included in the 60 days bracket. In case if he still fails to pay his instalment in the next 120 days he will be included in the 90 days bracket whereas, if, a person fails to pay his instalment in 150 days, then he will be included in the 120 days bracket "” this is the maximum limit, after which the person will be marked as a defaulter, and will be blacklisted for any kind of bank loan(s), till he repays it.

As per the banking policy, the staff of the recovery team cannot visit the defaulter's house but can remind him/her about the loan through telephone. On an average, it was observed that, 30 to 40 days after the deadline of the loan payment, the recovery team would visit the clients' houses. One of the borrowers revealed to The News that there is only one supervisor in the bank recovery department, who is an employee of the bank while the rest of the recovery team is hired on a commission basis. Furthermore, the borrower claimed that mostly political party activists are preferred in the recovery department because they can recover the money using strong-arm tactics on the basis of influence. All the recovery personnel in the banks are hired through a contractor and these employees work on a third party contract. This is the reason why the banks remain unaffected.

Moreover, a large number of clients revealed that the recovery staff personnel usually visited the clients' residents on Sundays or holidays and at odd timings. In case the client is not available, the recovery personnel threaten the family members so that the clients would make the payments at the earliest. Besides this, the recovery staff personnel use vulgar and abusive language with family members, especially females, the clients complained. Also, the recovery department personnel forcibly try to recover the money as they have to earn maximum amounts of commission from the bank, they added.

However, several bank officials revealed that their recovery staff works on a contractual basis and not on commission basis as they have good salary package. The personnel of the recovery team do not earn more than a commission of Rs5, 000 on a recovery of Rs0.1 million. If the staff is hired on a contract through a third party, then commission is offered to them. The recovery staff does not harass the clients for a commission as the amount is not much, officials elaborated. "The actual reason to pursue the client is that the contract of a person with the bank depends upon recovering the targets otherwise the authorities will terminate the contracts," they explained.

Furthermore, the bank officials mentioned that if a client is not paying the dues and is avoiding bank's enquiry then the recovery department assigns the task of recovering amount from the defaulter to the most experienced staff member.

They further clarified that the bank authorities have given the guidelines to their recovery teams but often the clients complain about inappropriate attitude of the recovery teams to the bank managers or high-ups. Some of the clients believe that the bank authorities pay no heed to their complaints, which is why the recovery team often behaves badly with them.

Five bank officials booked on court order

Wednesday, February 11, 2009
By By our correspondent

Karachi

The police registered a criminal case against five officials of a foreign bank on the complaint of a borrower who alleged that the bank recovery team, in clear violation of the Sindh High Court (SHC) ruling, raided his house, kidnapped his driver and took away his vehicle without due process of law.

Asad Ali Khan, a local businessman, moved the court for the registration of a criminal case against the foreign bank officials for kidnapping his employee and taking away his vehicle and mobile phone. The applicant said he had a civil dispute with the foreign bank over the outstanding installments of the vehicle that he had purchased on lease on June 1, 2003. He had already paid Rs1,688,000 to the bank. He said he could not submit the last six installments due to a financial crisis but he remained in contact with the bank officials to sort out the dispute.

He added however, that on January 14, a bank official, identified as Fazal Ghani, asked him to pay the outstanding amount within a week. On January 16, five bank officials, identified as Jamal Shahzad, Irfan Ali, Ali Kashif, Fazal Ghani and Nigah Hussain Bukhari, along with three policemen raided his house situated in Askari-IV, Rashid Minhas Road, kidnapped his driver and took away the vehicle. He said when he approached the Sharea Faisal police to register an FIR against the bank officials, they refused to do so.

He requested the court to direct the SHO of the said police station to register the FIR. Allowing the application, the court observed that the SHO was bound to lodge an FIR whenever he receives information that a cognizable offence was made out. The court directed the SHO to record the statement of the applicant and register an FIR in accordance with the law.

Following the court order, the police registered a criminal case against five bank officials under sections 395 and 365 of the PPC and started investigation.

 SHC notices to bank in loan recovery case

Tuesday, July 01, 2008
By our correspondent

The Sindh High Court (SHC) issued notices to a private bank and others on the petition of a borrower against harassment by bank officials for purpose of loan recovery and restrained them from taking any action against the petitioner without due process of law.

The order came on a petition filed by Anwar Ahmed against harassment by private bank officials. The petitioner submitted that they availed loan facilities from private banks, including NIB Bank, to expend their businesses but due to fluctuation in the business market he suffered a huge loss and could not pay the outstanding debts to the banks.

The court was prayed to restrain banks' officials from conducting raids at the petitioners' residence and harassing her family members, as they are illegally acting to pressurise the family of petitioner and insulting them in the eye of the public.

The SHC's division bench comprising Justice Dr Rana Mohammad Shamim and

Justice Ghulam Dastagir Shahani after preliminary hearing of the petition issued notices to the private banks for July 7. In the meantime restrained them from taking any action against the petitioner and her family without due process of law.

Court summons Citibank manager in loan case

Tuesday, May 12, 2009
Our correspondent

Rawalpindi

Taking action on an application, Banking Court Special Judge Manzoor Malik summoned the Citibank's manager and recovery officer in the court on June 16.

Chaudhry Muhammad Iqbal, a client of the Citibank, Cantonment Branch, has moved the court against the bank for allegedly harassing him despite timely payment of instalments. He also stated that some officials of the bank threatened him on telephone insisting him to pay the loan amount.

SHC directs SBP to furnish loan recovery procedure

Wednesday, August 20, 2008
By our correspondent

Karachi

The Sindh High Court (SHC) has directed State Bank of Pakistan (SBP) to furnish a formulated loan-recovery policy that is to be adopted by banks for performing their credit business.

The court was hearing a petition filed by a businessman, Anwar Mehmood, who moved the court against harassment by officials of private banks for the purpose of loan recovery.

The petitioner submitted that he had availed credit cards and loan facilities from private banks, including Standard Chartered Bank, NIB, ABN-Amro Bank, Askari Commercial Bank and Habib Bank but on account of uncalled for circumstances and fraud in his business he could not pay the outstanding bills for the past few months and had requested that these be adjustment.

The petitioner's counsels, Tahmasp R. Razvi and Syed Haider Imam Rizvi, submitted that their client had been paying outstanding bills for the last seven years but the private banks, instead of taking legal action against him, sent recovery teams to his house.

The men started harassing his family members in his absence.

As the matter was taken up by Sindh High Court's division bench comprising Acting Chief Justice Azizullah M Memon and Justice Khalid Ali Z Kazi, the SBP counsel sought time to furnish formulated policy regarding loan recovery.

The court also continued an interim order, restraining the banks' recovery teams from harassing the petitioner and his family members till further orders. The next hearing of the case has been adjourned till October 8.