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Debt collection practices: One death is just too many
While existing regulations govern debt collection under the broader legal framework for the financial services industry, a comprehensive regulatory framework specifically for debt collection operations is needed.
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A woman reads a message blast from the Financial Services Authority (OJK) on Sept. 10, 2023, calling for vigilance over illegal lending platforms. (Antara/Cahya Sari)
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recent report about the debt collection practices of a certain pinjol (online lending platform) that caused a customer’s death should prompt a close examination of Indonesia’s debt collection regulations and practices. This incident is just one of several instances of the troubling practices debt collectors employ, which are characterized by intimidation and terrorization of debtors, their families and personal contacts.
From a legal standpoint, the use of debt collectors is permitted. Debt collection is acknowledged as a business activity and falls under the oversight of the Financial Services Authority (OJK). Further, Article 191 in Bank Indonesia (BI) Regulation No. 23/2021 implies that payment service providers (PSPs) can utilize third-party debt collectors for credit card debt collection. Similarly, OJK Regulation No. 05/2022, which governs financing institutions, permits these institutions to cooperate with debt collection agencies by virtue of a written agreement.
Financing institutions are required to engage only with those agencies licensed by the authorized institution, and an agency’s debt collectors must possess the appropriate certifications.
Ironically, there is no regulation governing the operations of debt collection agencies, causing a lack of clarity regarding their business licenses and the institution authorized to issue certifications.
Without proper regulation, debt collection agencies can virtually establish their own standards, leading to a lack of accountability. Subsequently, this situation might lead to a potential for abusive and intimidating behavior as well as infringement of the privacy of customers and their personal contacts, as observed in many news reports.
Nonetheless, there are several legal provisions that can be used to hold lending companies and/or debt collection agencies accountable.
First, there is the possibility of criminal sanctions outlined in Article 335(1) of the Criminal Code (KUHP), in conjunction with Constitutional Court Decision No. 1/PUU-XI/2013 and Supreme Court Regulation No. 2/2012. These provide that anyone who forcibly coerces another person, through violence or the threat of violence, to act against their will can face a maximum punishment of one year in prion or a fine of up to Rp 4.5 million (US$3,000).
