I believe that every single threat that was "alleged" here was actually made. I was ROTFLMAO reading this stuff.
------------
May 25, 1999
--------------------------------------------------------------------------------
Credit-Card Debtors Tell of Scares
Despite Citibank's Code of Conduct
By STEVE STECKLOW and JONATHAN KARP
Staff Reporters of THE WALL STREET JOURNAL
BOMBAY, India -- Vikas Dresswala was working in his fabric shop one day in February when three men entered. He says one of them put a knife to his throat and told him: "You give the money now. Otherwise, we'll kidnap you."
But this was no robbery. His visitors wanted him to pay his credit-card bills.
Mr. Dresswala says he pleaded for time, and the men said they would return in three days, warning that he must pay them then or face the consequences. When they came back, waiting with him were undercover police.
"The came in and started threatening," says a police officer, Vanaiak Vast, who says one of the three visitors told the shopkeeper: "I want the money right now or I will kill you."
The police arrested the three and later accused them of extortion and making terrorist threats. The same accusations were filed against the head of the collection agency, known as Quality Consultants.
And the credit-card debt? It was owed to Citibank, the leader of India's surging credit-card market, which had hired Quality Consultants to collect the overdue account.
Customer Assistance
Citibank officials in Bombay express skepticism over Mr. Dresswala's claims, noting that no knife was recovered and that he still hasn't paid the debt -- a big one, totaling $27,000 for use of a dozen cards by four family members. The bank says that all the debt collectors it retains, whom it calls "customer-assistance specialists," are well-trained, carefully monitored and required to follow a code of conduct that prohibits threats or other abusive behavior.
But this isn't the first time Citibank, a unit of Citigroup Inc., has been accused of employing agencies that use strong-arm tactics here. In 1995, a Citibank cardholder named Deepak Gandhi accused a collector of threatening to have one of his kidneys removed and sold unless he paid his overdue $765 bill.
Citibank stopped hiring that man, a debt-collection entrepreneur named Abdul Qadir Shukri. But it later brought back Mr. Shukri (who sometimes calls himself S.A. Qadir) after concluding that the story was false. Mr. Shukri also denies it.
Now Mr. Shukri stands accused in the shopkeeper's case, as well -- because he is the owner of Quality Consultants. In fact, the reason he formed Quality Consultants was that Citibank didn't want to do business with him under his old firm's name. He denies wrongdoing and says he doesn't use threats or other improper methods.
Card Carriers
Citibank had intended to stop using Mr. Shukri again, though not until the end of June, so he could finish up some other accounts. But Monday, the bank said it had "permanently terminated" its contract with Mr. Shukri after learning he hadn't come clean about his background. Citibank also said that although complaints arose with only a "tiny fraction" of debts referred to outside collection agencies, it "will be thoroughly reassessing" practices governing such firms to assure the highest standards.
Credit cards didn't appear in India until about a decade ago, but they are catching on fast. In Bombay, where half of the populace lives in steamy slums and beggars work every clogged intersection, billboards promoting credit cards tower above shantytowns. Despite annual interest rates of 24% to 36%, the debt outstanding on all credit cards in India jumped 29% last year, according to an Indian firm that tracks the market.
Citibank pioneered credit cards here and has issued far more of them than anyone else, about a million of the approximately three million in use. But it faces hot competition from Britain's Standard Chartered PLC and local banks, plus, in the past year, General Electric Co.'s GE Capital and American Express Co. All are trying to sign up new Indian card holders.
Tough Market
India isn't any easy place to be a lender. For starters, it is harder to avoid bad credit risks. India doesn't have credit bureaus. Banks are just starting to share consumers' credit histories. So bad accounts abound: About 10 cents of every dollar charged on a credit card in India becomes delinquent, twice the average level in the U.S.
When that happens, suing the debtor isn't a quick solution. "Thousands of cases are languishing" for years in India's plodding judicial system, says Shirish Deshpande, a Bombay attorney.
Beyond this, Bombay is a crime-ridden city, rife with gangs that shake down businesses and middle-class residents. Foreign companies complain that the lawlessness provides cover for devious customers, who can exploit deep-seated suspicion of multinationals by falsely claiming to have been mistreated.
As in the U.S., lenders here often hand their most delinquent debts to outside collection agents, who are paid a portion of what they recover. But debt collection, too, is different in India. Unlike the U.S., where federal and state laws prohibit using threats or profane language or telephoning late at night, in India "there is no rule," says Swran Salaria, a Bombay collector. "You can do anything."
Some collectors openly boast of their innovations. B.R. Shetty, whose Bombay agency is called Unique Recoveries, says he has hired several eunuchs -- a shunned and feared group in India -- to show up at debtors' offices and homes and embarrass them into paying.
Citibank says it not only avoids agencies that use such tactics, but has recently invested in an in-house collection department staffed by university graduates. But it has continued using various outside collection agencies in India.
Apparent Pattern
And there have been complaints about the bank for years. A prominent Bombay businessman named P.S. Deodhar says that in 1992, a group of collectors blocked his car and tried to commandeer it, saying he had defaulted on a Citibank car loan. And a Bombay woman named Kiran Manral says that two years ago, a collector working for Citibank called her, implied she was a prostitute and told her she had "better pay up or else."
It turned out that the bank hadn't financed Mr. Deodhar's car at all, and that Ms. Manral had already mailed her payment, although it was a few days late. Citibank says that in both cases it had provided the collection agents with wrong information, and that it apologized to Mr. Deodhar and Ms. Manral. It says these were isolated cases not indicative of a general problem.
Bombay police disagree. But they say many Indians are reluctant to press charges against bill collectors because they don't want it known they are in debt. Pradeep Shinde, the senior inspector of Bombay's anti-extortion squad, says, "It is a fact there are a lot of complaints against Citibank, but unfortunately, no one is approaching the police."
Standard Chartered
Citibank isn't the only credit-card issuer to draw complaints. In November, Bombay resident Shrijiv Bhattacharya won a temporary injunction barring agents working for Standard Chartered Bank from harassing him or entering his workplace, after he claimed they barged in when he wasn't there and told his colleagues he would be beaten if he didn't pay a $1,750 bill.
And Prapanchan Krishnan, a data processor, says an agent working for Standard Chartered told him in March that unless he paid a $775 bill at once, his case would be turned over to a man who "breaks bones to get people to pay."
Standard Chartered's head of Indian consumer banking, Harpal Dugal, said in an interview in April that the bank had "never had a case in which we were accused of using strong-arm tactics" to collect debts. Later, asked specifically about the Krishnan and Bhattacharya allegations, Mr. Dugal denied that any threat was made in either case.
Although neither involved Mr. Shukri, the collector facing extortion charges in the Dresswala case, Standard Chartered sometimes uses him. In fact, it first started doing so while he was suspended by Citibank over the Gandhi kidney-removal allegation. Moreover, after suspending Mr. Shukri following the Dresswala incident, Standard Chartered says it has decided to resume using his services, though at a reduced level.
Another World
Mr. Shukri, 40 years old, operates upstairs in the rear of a crowded, low-slung tenement building in Bombay, a stark contrast to Citibank's sparkling new Bombay office tower. Mr. Shukri's employees study debtor data on computer screens while goats and chickens mill about in an alley outside.
Mr. Shukri says he got into the collection business by chance in the early 1990s while running a watch shop. He took out a car loan that was supposed to include a free radio and speakers. When the audio gear didn't appear, Mr. Shukri says, he was so persistent that the finance company suggested he would make a good collector, and recommended him to Citibank.
Mr. Shukri says he specializes in the hardest cases, working for banks and cellular-phone companies, and keeping up to 12% of what he collects. He says his operations in several cities, under various names, recover about $165,000 a month.
Mr. Shukri says his employees never resort to threats or weapons. He says a collector's first job is to find out why a customer didn't pay and help "solve" the problem. Sometimes that requires instruction on the benefits of keeping a good credit history, he explains, while other times it entails helping debtors overcome their shame by offering to broker a face-saving deal with the lender.
"We talk to them and bring them comfort," the collector says.
The Kidney Case
One of his firms, Bombay Credit & Co., got the Deepak Gandhi account in late 1994 after Mr. Gandhi became delinquent on a $765 credit-card bill and, according to Citibank, had ignored many calls and letters. Two months later, Mr. Gandhi complained to Citibank in writing that when he asked Mr. Shukri for more time, Mr. Shukri offered him three days and said that if he didn't pay then, he would have to have an organ sold to cover the debt.
Mr. Shukri "was keen to have one of my kidneys removed," Mr. Gandhi wrote, and "in my presence rang up one Dr. Pillai." The card-holder alleged that five Shukri employees then tried to force him to sign a consent form for the surgery.
Mr. Gandhi also complained to a Bombay social activist, who informed the Indian Express newspaper. It wrote about the case, quoting a Citibank vice president, Ravi Bhatia, as saying that "the whole accusation in this instance is false."
In fact, Citibank was just starting to look into it. The social activist's files show that the day before Mr. Bhatia spoke to the newspaper, he wrote to the activist that Citibank had taken "a very serious view of Mr. Gandhi's complaint and initiated a thorough investigation... ." Citibank didn't make Mr. Bhatia, now head of its operations in Oman, available for comment.
Another Citibank executive at the time, Aditya Krishna, also told the activist the bank had begun an investigation, and said it had suspended the collection agency in the meantime. He says in an interview that the subsequent inquiry took months.
The police eventually dropped their investigation. Citibank said it decided to disbelieve Mr. Gandhi and believe Mr. Shukri, in part because of the debt collector's effective handling of thousands of cases, with no complaints other than Mr. Gandhi's.
Back in the Fold
In 1997, Citibank resumed doing business with Mr. Shukri. It didn't rehire his Bombay Credit, though. It says it asked him to create a different entity so it could avoid "alarming our customers, given the sensational and unproven allegations in the Gandhi case."
Mr. Shukri formed Quality Consultants, and resumed working for Citibank. Eventually, he was given the Dresswala case.
The Dresswala family shop sews costumes and dresses. Mr. Dresswala says he paid his Citibank credit-card bill regularly and his credit line grew. He and his family had a dozen cards in all, he says, and got carried away in using them.
When their total debt, including interest, topped $27,000 and their payments grew erratic, Citibank offered to reduce the bill to the $18,000 principal amount if Mr. Dresswala would make six installment payments using postdated checks. He agreed, but his first check bounced. Citibank filed suit in December seeking imprisonment and a fine -- remedies that a private litigant can seek in India.
The account was in the hands of an outside collection agency that hadn't made any headway. In February, Citibank handed it over to Mr. Shukri's Quality Consultants. "We decided we needed to move it ... to a more aggressive agency," says Nikhilesh Balgi, a Citibank officer who handled the account.
Quick Denial
Mr. Dresswala says the three men with a knife showed up at his shop on Feb. 8 and one placed it to his neck as he issued the kidnapping threat. "Sweat was coming out," Mr. Dresswala says. "A knife is not a small thing." When he won a three-day reprieve, he set up the police sting.
The arrests of the three Shukri agents made headlines in Bombay. Citibank held a news conference there on Feb. 16. "It is not possible that the agents would have used threats," said S.K. Jain, the bank's credit officer for India. "We screen our collection agencies carefully, check their records and take their references."
But the same day, Citibank was telling Bombay police that any infractions weren't its fault. "If the Quality Consultants recovery agents have crossed the code of conduct given them," a credit officer named Gurudeep Madhan told the police in a statement, "it is solely their responsibilities and Citibank is no way responsible for their acts and conduct." Inspector Shinde says Citibank's contract with Quality Consultants prevented police from charging bank officials: "They are safe only because of this agreement," he says.
Citibank's Mr. Jain, despite his news-conference denial, now says it isn't clear what happened in the Dresswala case. "We don't know, to be honest. No one from the bank was there," he says.
Mr. Dresswala, noting that he paid off a Citibank personal loan slightly ahead of schedule, says that he never had any intent to stiff Citibank.
Mr. Shukri and his employees are out on bail. Police don't expect their extortion trial to begin for at least four years.
One reason Citibank said it decided to believe Mr. Shukri's denial of the kidney-removal allegation and resume working with him was that he had no police record. In fact, however, Mr. Shukri was convicted in 1983 of smuggling watch batteries into India, for which he was fined.
Although Citibank officials interviewed in India repeatedly said Mr. Shukri had never been arrested, Monday the bank acknowledged that its "investigations failed to uncover" the smuggling case. It said that it wouldn't have hired Mr. Shukri if it had known of his criminal record, and that it has now terminated his contract.
|
