To collect debt, it has become commonplace for creditors, especially financial institutions, to hire other people or juristic entities to do the job. The remuneration is calculated on a percentage basis of the amount recovered from the debt collection.
The rapid growth of the debt collection business has caused several problems because of a lack of clear guidelines on debt collection procedures.
The incentive of the remuneration also drives debt collectors to push hard to have the debtors make repayments, irrespective of whether such enforcement is lawful or fair to the debtors, or whether it violates the debtors' personal rights or not.
The Financial Consumer Protection Centre said most complaints relate to improper debt collection practices, such as the use of threats and intimidation to extract money from debtors.
The National Council for Peace and Order (NCPO) in July adopted a bill on debt collection that was initiated by the previous government.
The bill, now before the National Legislative Assembly (NLA), was given impetus this month after the shocking news of a victim of debt who set herself ablaze.
The bill says people who operate a debt collection business must be registered and must follow guidelines.
For example, debt collectors must contact the debtors only between 8am and 8pm on weekdays, and from 8am and 6pm on weekends. Unfair and improper debt collection practices are prohibited. Debt collectors are barred from insulting or threatening debtors.
Charging debtors too much interest is also prohibited. In this law, the word "credit" means loans, credit card business, hire purchase, leasing and factoring.
Interestingly, the law does not cover the kind of debts which farmers owe to the merchants who sold them farm chemicals and equipment.
Its emphasis is on debts owed to financial institutions which have exact systems of debt collection.
To protect farmers, the NCPO has issued a special order to prevent creditors from collecting debts unfairly from the farmers.
Violators are subject to a term of imprisonment not exceeding two years, or a fine not exceeding 40,000 baht.
The business of loan sharks is regarded as a non-financial institution. Poor people use its service because they have no access to financial institutions, as they have no regular salary or collateral to provide to financial institutions with a guarantee.
They turn to loan sharks even though the interest is much higher than that charged by financial institutions, or as prescribed by law. Loan sharks also use harsh methods including physical attacks.
The bill may provide better protection to debtors of formal financial institutions. But the NLA should improve the bill to help victims of loan sharks more effectively before it is passed into law.
Rujira Bunnag is managing director of Marut Bunnag International Law Office.