Time and again we read about banks and financial companies using musclemen and thugs to threaten and forcibly recover financed goods from consumers on their failing to pay back some instalments of a loan.

Well, in future, all those who violate the law of the land and resort to forcible recovery, will have to pay for the consequences of such action. Reacting strongly to such strong-arm methods used by banks and finance companies, the apex consumer court has made it clear that financial institutions that re-possess goods by force and without notice, have to pay compensation to the consumers. The amount of compensation would depend on the facts and circumstances of each case, the apex consumer court has said.

That’s not all. It has made it clear that in cases where goods have been taken away or re-possessed by force and without prior notice, the finance company loses the right to demand from the consumer unpaid amounts. In addition, the consumer has to be paid the market value of the recovered goods and may be even compensation for the harassment and humiliation undergone.

The apex consumer court’s strong condemnation of the unlawful methods employed by some of the banks and financial institutions has its origin in a complaint filed by S.Vijayalaxmi, a resident of Delhi, against Citicorp Maruti Finance Ltd. According to her, she bought a Maruti Omni, after taking a loan of Rs 1,82,396. As repayment, she was to pay a sum of Rs 2,71,636 in 60 equal monthly instalments of Rs 4,604 each. From May 2000 to January 2003, she paid the instalments without fail, but in January 2003, her husband met with an accident and she was unable to pay. She then requested the officials of the bank for a one-time settlement and the bank agreed to settle for Rs 60,000. However, before the expiry of the time given to her to make the payment, the van was forcibly taken away by “recovery agents”.

Describing such action as “against public policy and public interest”, the apex consumer court upheld the decision of the district forum awarding the consumer Rs 1.5 lakh towards the market value of the car, along with 9 per cent interest and Rs 5,000 towards compensation. In addition, the apex consumer court also awarded Rs 10,000 towards costs. This order should certainly make banks and other financial companies sit up and think over the methods employed by them to re-possess financed goods (Citicorp Maruti Finance Ltd vs S.Vijaylaxmi, RP no. 737 of 2005, decided on July 27, 2007).