Fair Debt Collection Guideline

1- State Bank of Pakistan in its endeavor to further streamline the procedure of collection/recovery of debt has formulated guidelines on debt collection to set the minimum standards to be observed by Banks/DFIs in order to address the grievances of customers/borrowers. These guidelines are applicable to various types of customer financing facilities including credit cards, House Loans, Auto and Personal Loans etc.. In case any Bank/DFI has already developed its dept collection code of conduct, the same shall appropriately be modified in line with these guidelines.

2. The Bank/DFIs shall follow the following minimum guidelines in their debt collection efforts:-

i) Before proceeding for debt collection/recovery from their customers/borrowers, the Bank/DFI shall insure to provide him/her all information relating to payment fallen due. A minimum of 14 days will be served to the customers/borrowers through letter/SMS advising him/her to make over due payment, before a visit to his or her residence /business place is undertaken in a lawful manner to negotiate recovery of the outstanding amounts. Advance notice will be required to the customers to when Bank/DFI staff picks up the payment and if it is done on customer’s request then it should be properly recorded.

ii) Banks/DFIs in their collection/recovery efforts shall ensure that (a) the customers/borrowers are not contacted at inconvenient time (b) proper disclose of identity, name of the bank and purpose of call is provided (c) only law full and acceptable business language and professional attitude is adopted in establishing such contact.

iii) Banks/DFIs shall ensure that (a) collection calls are properly recorded (b) customers/borrowers are contacted at the given address/phone numbers and n case they cannot be contacted, at alternate address/phone number obtained through collection efforts (c) “Visit Reports” shall be kept on record in the form of hard copy or on electronic collection system for at least six months (d) collection staff shall not harass their family members. However, necessary information could be obtained from family/friends/third party of the borrowers if he/she is not contact for 30days after the first missed payment.

iv) Bank/DFIs shall give 14 days written notice before repossessing the leased vehicle on breach of an agreement/default on repayment by the customers/borrowers, bank/DFIs and the recovery agencies employed by the bank/DFI are advised to allow the customer/borrowers to take possession of their valuables/goods out of the vehicle.

v) Banks/DFIs are advised to ensure that (a) their collection/recovery staff donot transfer or misuse any personal data of customers/borrowers without their prior approval (b) any information of customer/borrowers provided to the collecting staff are properly documented.

vi) The Bank/DFIs shall ensure that the collection/recovery agencies employed by them must be enrolled with Pakistan Bank Association (PBA) once the arrangements in this regard are in place. In this regard, PBA is advised to develop criteria keeping in view the Guidelines on Outsourcing Arrangements” issued by State Bank of Pakistan.

3- In order to effectively control the functions of collection/recovery and the human resources engaged in this process, bank/DFIs would ensure the following:

i) Frame a code of lawful conduct for recovery staff.
ii) Introduce a well defined mechanism for addressing complaints against the collection/recovery staff.
iii) Undertake a periodical review of their recovery procedures / mechanism for improvements in line of law, market practice/development.
iv) Engage suitably qualified staff in collection/recovery and provide them necessary training.
v) Regular monitor the activities of collection / recovery staff / agencies.

4- These guidelines shall be in addition to, and not in derogation of the relevant laws / regulations.

5- The State Bank of Pakistan during the course of inspection will check compliances of above guidelines strict action shall be taken against the bank/DFI for non –compliance of above guidelines.