A bill that outlaws the use of verbal or physical coercion by debt collectors working for creditors passed the third and final reading in the National Legislative Assembly (NLA) on Thursday.
The bill was passed by a vote of 199-2 with four abstentions.
The legislation makes it illegal for bill collectors or creditors to take advantage of or intimidate debtors or their guarantors.
It covers the entire informal lending system and sets down rules on how debts are collected. Violators are liable to a jail term of up to five years and/or a maximum 500,000 baht fine under the provisions.
In the second reading, the majority of NLA members proposed an amendment to a clause that said the bill, which takes effect 90 days after being published in the Royal Gazette, had retroactive effect on loan agreements made prior to its enactment. The amendment was passed, ensuring the legislation will not be retroactive.
It is the first-ever bill to regulate the debt collection sector.
The key provisions prohibit a creditor from seeking damage from a defaulting borrower at an extent beyond the value of the collateral, or demanding money from a guarantor at the same or more than the amount borrowed. They must also give a guarantor six months to find a runaway borrower before forcing the guarantor to settle the debt.
Section 9 of the legislation prohibits debt collectors from threatening, using violence, causing bodily harm or damaging the reputation or assets of a debtor or others. They are also barred from disclosing information about the debt to a third party.
Section 3 defines debt collectors as lenders or those who are authorised by creditors to collect debts. They are required to contact debtors only between 9am to 8pm and must identify themselves to the debtor as well as provide written proof from the creditor authorising them to collect the debt.
The legislation comes into force once it receives royal approval and is then published in the Royal Gazette.