Saturday, 30 August 2014

Legal Action Procedures: Personal Loan Part 2


Continued from Part 1. As what has been mentioned before, at this stage, the Bank will severe all "Diplomatic Ties" (until payment is made, that is) with the borrower demanding the whole loan balance including costs. So, before proceeding, the Bank will attempt to call the borrower or by sms for the last time asking for payment with the threat of Summons and this time it is for real unlike the same threat previously used when the account is two or three months overdue.

When there is no response from the borrower, the instruction will finally be delivered. Sometimes it is Mr Lawyer who will follow up on this matter whether to proceed further as a "note of concern" because sometimes the Bank will just keep quiet and may not inform Mr Lawyer when payment was received.

After all the necessary documentation for Summons has been prepared especially the "Statement of Claim", Mr Lawyer will instruct his/her staff to file the Summons in Court. The Summons filing process is not "free" as it involves one of two methods namely the normal physical filing or through the "e-filing" method where the documents will be scanned by the staffs of Mr Lawyer or by the court's staff for a fee. It sounds simple enough, the clerk or "despatch" will go to the Court (by motorcycle) to do the physical filing or prior scanning is done at the office. However, Mr Lawyer's bill will indicate some "professional fees" required to read the instruction, prepare the documents (copying the statement given by the Bank on a ready made "template") and finally the filing and the filing fees apart from the standard Court fees shall also include the travelling cost of filing where the cost charged is as if it was Mr Lawyer himself/herself who did the filing using his/her gas guzzling luxury car complete with the lawyer's attire and all. (just joking Mr Lawyer, don't get annoyed, that is the "norm" in the industry)

After the process of filing Summons, the Bank will have to wait (again!) for the Court to issue the copy of the Summons with a "mention date" (we will elaborate further on this term). After getting the Summons copy, it will be delivered  to the last known address of the borrower and guarantor (if any) through registered post. The "mention date" used here is to give a better understanding. A few years back, the Summons will specifically have a date written as the "mention date" for the borrower to appear in Court. Nowadays with some amendment to the "Rules of the Court" it is not specifically written anymore. What is written is a certain date and the borrower will have to be present in Court after a number of days so specified. For example, it may be written this way "You are Summoned to appear in Court 14 days after this date" or something to that effect and the borrower would have to calculate the "mention date" all by himself. If there is no response or the borrower miscalculates the date, a Judgment in Default of Appearance will be granted by the Court.

During this time, a full scale "investigation" will be carried out by the Bank's "CSI" team to get more information on the borrower or guarantor (if any) especially their current whereabouts and daily activities. The "CSI" term is used loosely here because this is nothing like the "CSI" you used to see on TV (with slick moves, cool cars, nice music, cool shades, pretty ladies and advanced tools) so if you have a wild imagination about the Bank's "CSI" team, you may stop now. It may consist of the same guys/gals doing the collection or another "team" sometimes consisting of only one grumpy old bloke.

For the borrower, he/she still has the time to negotiate as the "olive branch" is still available since the time frame before the "mention date" is still available. As for the guarantor, we shall discuss in more details at the end of  Part 3.  For the borrowers of the type "able but do not want to pay", normally they will give in and make payment since most of them would like to take up more loan and would not want their record to be tarnished. For the "Scarface" or "Don Corleone" type of borrowers, (if you don't know who they are, you can Google Movie Wiki "The Godfather" or "Scarface") that is in the "not able /may be able but do not want to pay" category, the Summons would not have any effect whatsoever. (not yet). In order to understand fully the categories of borrowers, you can refer to this posting entitled PART 5 - THE COLLECTION DEPARTMENT  or you can see the chart that is reproduced here for easy reference:

After the period of "ceasefire" has ended that is the "last and the very last" chance to make a new promise or payment, the "mention date" finally arrived. Please refer to the info graphic below on the various possibilities that can happen on that day. No need to elaborate further on that.

We shall now go to the next month of overdue position by looking at the graphic below:

As what has been depicted, depending on the Court's decision, Judgment will be given if the case is not prolonged by any Notice of Objection or any other delaying tactics by the borrower's Lawyer. Please be reminded that the borrower's Lawyer MUST NOT be from the same Bank's panel of lawyers otherwise there will be a conflict of interest which means going against "the boss". There will be another waiting period to get the sealed and certified copy of the Judgment within one or two weeks from the mention date barring any long festive holidays.

Before we continue further, I would like to comment a bit about the allowed time limit of taking legal action. Banks or Creditors has until 6 (SIX) years from the date of default to start with the filing of Summons. That means the Bank can theoretically ignore a
default of a particular account for years (which is impossible unless the Bank itself is facing Bankruptcy or  in the process of being "eaten" by other Banks as in the 1997 financial crisis or the collection staffs are a bunch of buffoons and that goes to the boss as well) until the last day of the six year period to file Summons.

When Judgment is obtained, the Bank will have another 12 (TWELVE) years to execute the Judgment. Therefore theoretically, the Banks have at least 18 (EIGHTEEN) years to proceed with legal action against its borrowers. So, if there is no action taken in these two scenarios, it is then logically and fairly be concluded that by this non action the Bank has "discharged" or released its rights to collect the debt further as ample time has been given. Inability to locate the borrower is the normal excuse given for not pursuing a case such as those requiring personal service of Court Orders and Notices but avenues for "Substituted Service" in local newspapers are always available in order to avoid the "time barred" factor. We shall discuss the Limitation Act in another posting otherwise this post will take more space. We shall finish this story first.

Back to our personal loan story. After Judgment has been obtained, it is up to the Bank to choose the mode of "execution" normally after the loan has reached its seventh month overdue position as depicted in the info graphic below.

As you can see above, the mode of "execution" chosen will depend on certain conditions and timing and this is where the investigation of the "CSI" department will contribute significantly. We will go through the various modes of "execution" in the next post...


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