Is Credit Card Settlement Legal? Know Your Rights Before You Settle
Struggling with credit card debt can be stressful, and many borrowers consider settlement as a way to reduce their financial burden. However, banks and collection agencies often resort to harassment tactics, making the process even more challenging. But is credit card settlement legal? What are your rights as a borrower? Let’s break it down.
Is Credit Card Settlement Legal in India?
Yes, credit card settlement is 100% legal in India. RBI guidelines allow banks to negotiate settlements with borrowers who are unable to repay their full outstanding debt due to financial difficulties.
🔹 In a settlement, the bank agrees to accept a reduced lump sum amount instead of the full outstanding balance.
🔹 The account is then marked as “Settled”, which is different from “Closed”, impacting your CIBIL score.
🔹 While legal, banks cannot harass you into making a payment. You have rights!
Your Legal Rights During Credit Card Settlement
✅ No Harassment by Recovery Agents
As per RBI guidelines, banks CANNOT:
🚫 Call you at odd hours (before 7 AM or after 9 PM)
🚫 Use abusive language or threats
🚫 Visit your home or office to intimidate you
🚫 Shame you on social media or contact relatives about your debt
✅ Right to a Written Settlement Agreement
Before making any payment, always get the settlement terms in writing from the bank. This should include:
📌 The agreed settlement amount
📌 The payment deadline
📌 A commitment to provide a No Objection Certificate (NOC)
✅ Right to Dispute Unfair Charges
Banks cannot add hidden charges or increase interest rates unfairly. You have the right to dispute any wrongful fees.
✅ Right to File a Complaint Against Harassment
If a bank or recovery agent is harassing you, you can file a complaint:
1️⃣ With the bank’s Grievance Redressal Officer
2️⃣ With the Banking Ombudsman
3️⃣ With the police or consumer court in severe cases
How to Safely Settle Your Credit Card Debt Without Harassment
🔹 Step 1: Assess Your Financial Situation
Calculate how much you can afford to pay as a one-time settlement.
🔹 Step 2: Contact the Bank Directly
Avoid third-party recovery agents. Always negotiate directly with the bank’s debt settlement department.
🔹 Step 3: Negotiate for a Lower Amount
Banks often start with a high settlement offer. You have the right to negotiate for a lower payout.
🔹 Step 4: Get a Written Agreement
Never make any payment without a formal settlement letter from the bank.
🔹 Step 5: Request a No Objection Certificate (NOC)
Once you pay the agreed amount, ask for an NOC confirming that your dues are settled.
Facing Harassment Over Credit Card Debt? We Can Help!
If you’re dealing with harassment from banks or recovery agents, know that you are protected by law. Our experts at Bank Harassment can help you negotiate settlements legally and protect your rights.
📞 Call Now: 1800 309 1902
📧 Email Us: info@bankharassment.com
