Banks back to bad old ways

Banks are defying instructions from the State Bank of Pakistan in recovering credit card loans.

LAHORE: Banks have been defying instructions from the State Bank of Pakistan (SBP) in recovering credit card loans, The Express Tribune has learnt.

In 2009, the SBP barred banks from sending loan recovery agents to people’s homes or from talking to their families, and instructed them to be polite at all times in dealing with customers.

This followed widespread outrage at the banks after a Karachi citizen, Rana Atif, committed suicide in April 2008 apparently because he was threatened by aggressive loan recovery agents.

The Sindh High Court had taken notice of the incident and directed the SBP to restrain commercial banks from harassing customers.

But private banks are not following the SBP’s instructions, according to customers.

Majeed Malik said he had been receiving threatening phone calls from his bank for the last two months for not paying his credit card bill on time. “They have made my life hell. The last time they used very harsh words and threatened me,” he said.

Farooq Shah, another credit card user, said a bank staffer visited his house. “I was not at home when the official came and he was very rude to my family,” he said.

Consumer credit grew rapidly in Pakistan after banks began offering easy access to car, personal and credit card loans in 2002. The number of credit card users increased to seven million in 2007.

But things changed with the financial crunch in 2008, as the number of bank loan defaulters increased sharply, said banker Sadeed Malhi.

He said commercial banks were in a fix, as the central bank was pressing them to reduce non-performing loans while at the same time not allowing them to pursue aggressive strategies to recover such loans.

“If we want to intensify recovery from customers then we have to be harsh. Some people don’t understand politeness,” said banker Asif Mehmood. He said credit card loans were the most insecure loans as they were issued without guarantees, so banks had to be aggressive in recovering them.

Mehmood said customers often tried to deceive banks with “excuses” like unemployment and inflation. “People should not get credit cards if they cannot repay the loans,” he said.

SBP spokesman Waseemuddin said customers should file any complaints about the behaviour of commercial banks in writing to the central bank. He said the SBP had a special department, the Consumer Protection Department., to deal with these complaints. “We have always protected the consumer’s rights in the past and will continue to do so in the future,” he said.

Published in The Express Tribune, September 22^nd, 2010.