Credit Card Charge: The Supreme Court has overruled a 16-year-old decision of the National Consumer Disputes Redressal Commission (NCDRC). After this, banks can charge more than 30 percent interest on credit card dues from customers.
Credit Card Charge: The Supreme Court has rejected a 16-year-old decision of the National Consumer Disputes Redressal Commission (NCDRC). After this, banks can charge more than 30 percent interest on credit card dues from customers. NCDRC had said in its decision that charging excessive interest rate from customers on credit card dues is unfair trade practice. This decision has come on the appeals filed by Citibank, American Express, HSBC and Standard Chartered Bank against the order of NDCRC dated July 7, 2008.
The Commission had said that interest rates ranging from 36 per cent to 49 per cent per annum on credit card dues are very high and are like exploitation of borrowers. A bench of Justice Bela M Trivedi and Justice Satish Chandra Sharma said that this comment of NCDRC is ‘illegal’ and is an interference in the clear, unambiguous delegation of powers of the Reserve Bank of India. The court said that the decision of the Commission not to charge interest rate more than 30 percent is contrary to the legislative objective of the Banking Regulation Act, 1949.
In its December 20 verdict, the apex court said that the banks had not made any misrepresentation to deceive the credit card holders and the pre-conditions of ‘deceptive conduct’ and unfair practices were absent. The court said that the NCDRC has no right to re-fix the terms of the contract made between the banks and the credit card holders which were mutually agreed upon by both the parties.
The bench said, “We agree with the arguments of the Reserve Bank of India that in the facts and circumstances of the present case, the question of directing the RBI to take action against any bank does not arise.” Along with this, the court said that contrary to the provisions of the Banking Regulation Act and the circulars/directives issued under it, the question of directing the Reserve Bank to impose a limit on the interest rate on the entire banking sector or any one bank does not arise.
The apex court said that the National Consumer Commission has full authority to cancel unfair contracts imposed unilaterally or having unfair and unreasonable conditions. But the rate of interest charged by the banks is determined by financial prudence and RBI instructions.
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