BoG cautions lenders against using force to recover debts

Financial institutions, money lenders and debt recovery agents have been cautioned against physical attacks, harassment and the unlawful seizure of personal belongings when attempting to recover debts from defaulting borrowers.

The warning was issued by the Assistant Director of the Collateral Registry at the Bank of Ghana (BoG), Alexander Koomson, who clarified that lenders cannot arbitrarily publish a debtor’s name in the media or seize collateral without adhering to strict statutory procedures.

Speaking in an interview with journalists during a regional sensitisation programme on the Borrowers and Lenders Act, 2020 (Act 1052), held in Kumasi, Koomson emphasised that the law strictly prohibits the use of physical force or violent recovery tactics, urging lenders to follow legal procedures to avoid criminal liability.

The stakeholder engagement in the Ashanti Region was organised by the Bank of Ghana in collaboration with the Association of Ghana Industries (AGI) and the Ghana National Chamber of Commerce and Industry (GNCCI) to educate business owners, financial institutions and borrowers on their rights and obligations under Act 1052.

Addressing debt recovery procedures, Koomson explained that before a lender can publish the name of a defaulting borrower in national newspapers, specific contractual and statutory steps must be followed.

He noted that the initial loan agreement must explicitly state the agreed modes of communication, such as physical letters, registered mail or email, for issuing demand notices in the event of a default.

“Before you can disclose to the public that someone owes you and has not paid, there are steps you must follow. The law requires that you serve the borrower a demand notice on three separate occasions. If you write once and they do not respond, you must write a second and a third time,” Koomson stated.

However, he revealed that it is only after the borrower fails to respond to the third written demand notice that the law permits the lender to publish the debtor’s name and details in two national daily newspapers.

Responding to concerns about viral videos showing debt collectors physically assaulting debtors and seizing personal belongings, the BoG official stated unequivocally that such actions are illegal.

“The use of force is not allowed. You cannot use force to get your money. You cannot physically attack people, run after them, or seize their personal effects,” Koomson warned.

Clarifying what lenders can legally do when dealing with secured assets, such as a vehicle used as collateral, Koomson made a clear distinction between immobilising an asset and repossessing it.

On immobilisation, he said that if a borrower defaults and ignores three formal demand notices, the lender has the legal right to immobilise the asset. For example, the lender may deflate the tyres of a pledged vehicle so it cannot be driven away.

On repossession, however, he said lenders cannot forcibly take physical possession of the asset on their own.

According to him, to repossess a pledged property, the lender must apply to the court for a warrant and engage the Ghana Police Service to accompany them for a peaceful takeover.

“If you use force and harm the borrower, they can sue you in court. Lenders must stick strictly to the legal procedure to recover their money,” he cautioned.