State Consumer Disputes Redressal Commission
Ms. Anjoo Sharma vs Hongkong & Shanghai Banking ... on 17 December, 2009
BEFORE THE A BEFORE THE A.P. STATE CONSUMER DISPUTES REDRESSAL COMMISSION AT HYDERABAD. C.C. No. 32/2009 Between: Ms. Anjoo Sharma D/o. Late N. K. Khanna Age: 44 years, R/o. 6-3-883/2/3, 4th Floor Mahalaxmi House Krishna Pearls & Jewels Punjagutta, Hyderabad-82. *** Complainant And The Branch Manager Hongkong & Shanghai Banking Corporation Ltd. (HSBC Bank) At 6-3-1107 & 1108 Rajbhavan Road, Somajiguda Hyderabad- 500 082. *** Opposite Party Counsel for the Complainant: P.I.P. Counsel for the O.P: M/s. V. Padmanabhan HONBLE SRI JUSTICE D. APPA RAO, PRESIDENT & SRI R. L. NARASIMHA RAO, MEMBER
THURSDAY, THIS THE SEVENTEENTH DAY OF DECEMBER THOUSAND NINE Oral Order: (Per Honble Justice D. Appa Rao, President) ***
1) This is a complaint filed against HSBC Bank to direct the opposite party to follow the loan repayment schedule, and not to collect higher rate of interest and amount towards EMI, and pay compensation and costs.
2) The case of the complainant in brief is that she had taken a mortgage loan of Rs. 25 lakhs on 25.9.2006 payable in 10 years with an EMI at Rs. 34,792/- stipulating rate of interest at 11.25% floating. The bank has been collecting interest from her savings bank account with the same bank on 15th of every month. She found from the mortgage loan statement that instead of principal amount in the EMI getting increased it was interest component which was being increased abnormally. When she contacted she was informed that rate of interests have gone up and the same being charged at Rs. 15.75%. The statement sent on 31.1.2009 revealed that the rate of interest was changed six times in 22 months from 10/2006 to 8/2008. This is a clear case of cheating. After repeated demands and after filing of the complaint, the bank had informed that it had reversed the excess interest amounting to Rs. 1,86,606/- and credited the same towards principal to her loan account. Though she sought for her loan account through net-banking they refused stating that it was against banking norms. She alleged that she did not read the mortgage loan agreement nor was aware of the conditions. They sent the details of her loan account, a perusal of which shows that there were number of discrepancies. Though the matter was settled the bank has again claimed Rs. 15,534.29 as against Rs. 10,581.87 /- towards principal as per final repayment schedule Dt. 22.5.2009. Since the bank had collected the amount contrary to the repayment schedule amounting to deficiency in service sought a direction against the bank to follow the final loan repayment schedule, and compensation of Rs. 5 lakhs towards mental harassment and costs.
3) The bank resisted the case. While denying each and every allegation made against it, the bank alleged that the complainant is not a consumer as defined under the Consumer Protection Act. While fixing EMI the amount repayable every month by the complainant remains constant, while the interest and the principal amount keep changing. Initially interest amount could always be high since the principal outstanding component during the initial period would be high, and therefore they appropriated the amount towards interest and the appropriation towards principal would be low. The complainant herself had agreed for floating rate of interest. Therefore as and when interest rates are increased the interest component in the EMI would be increased. In view of the fact that the interest rates were changed and increased, repayment schedule were changed accordingly. The bank by treating the case of the complainant as an exceptional one reversed certain portions of interest. The allegation that the complainant did not read the mortgage loan agreement nor was aware of the conditions is not true. Simply because that the bank has decided to refund Rs. 1,86,606/- it cannot be treated as deficiency in service or intentional cheating. On the other hand she was bound to repay Rs. 1,86,606/- paid by it. Therefore it prayed for dismissal of the complaint with exemplary costs.
4) The complainant in proof of her case filed her affidavit evidence and got Exs. A1 to A30 marked, while the bank filed the affidavit evidence of its Legal Officer and did not file any documents.
5) The points that arise for consideration are :
1) Whether the bank has been illegally collecting the interest contrary to the repayment schedule and whether it would constitute to deficiency in service?
2) Whether the complainant is entitled to any compensation, if so, to what amount ?
3) To what relief?
6) It is an undisputed fact that the complainant had taken mortgage loan of Rs. 25 lakhs on 25.9.2006 depositing her original title deeds agreeing to repay the same within 10 years with rate of interest @ 11.25% floating.
EMI was fixed at Rs. 34,792/- from 9/2006 to 7/2009. It is also not in dispute that the payment towards EMI is being deducted from from out of the savings bank account of the complainant on 15th of every month.
7) It is also not in dispute that the bank had increased the rates of interest on the mortgaged loan six times between 10/2006 and 8/2008 ranging from 11.25% to 15.75%. In other words as against the EMI of Rs. 34,792/- the bank was collecting more than 90% towards interest and this principal and interest ratio was totally against the loan repayment schedule Ex. A3. No doubt changing of rates of interest is at the discretion of the bank, however, subject to change in the prime lending rates from RBI. The complainant asserts that at no time she was informed about the change of rates of interest, service charges etc, as stipulated by the Banking Codes and Standards Board of India and RBI guidelines and that the interest component of EMI being abnormally high about 92% p.a.
8) On 28th month (of repayment of mortgage) loan she issued a notice for which the bank gave its reply Ex. A5 Dt. 31.1.2009 stating that We would like to inform you that repayment schedule is a tentative schedule and may or may not match with actuals. In a way it had admitted that it was contrary to Ex. A3 loan repayment schedule. Obviously the bank changed its terms and conditions clandestinely without the consent of the complainant.
It was not as though the bank did know its mistake. When protested it had credited a sum of Rs. 1,86,606/- towards principal of mortgage loan.
This was made obviously after receiving a notice from the complainant Dt. 6.3.2009 wherein she had pointed out the mistake in not crediting this amount. It was not as though the bank had done it voluntarily on its own accord. After knowing the mistake it credited the amount, when the complainant protested as such. In other words, the bank had credited huge amount of Rs. 1,86,606/- and all through it had the advantage of keeping this amount with it, obviously utilized for its banking transactions. It is not out of place of mention that the entire transaction by the bank was against the norms of Banking Codes and Standards Board of India (BCSBI) and RBI guidelines on fair practices code for lenders. For benefit we excerpt some of the conditions mentioned by BCSBI marked as Ex. A26 and RBI guidelines marked as Ex. A27.
The Banking Codes & Standards Board of India:
Interest Rates: Change in interest rates:
We will inform you when we change interest rates on our products.
Credit Reference Agencies a. When you open your account, we will tell you when we may pass your account details to credit reference agencies and the checks we may make with them..
b. We may give information to credit reference agencies about the personal debts you owe us if:
i) You have fallen behind with your payments;
ii) The amount owed is not in dispute; and
iii) You have not made proposals we are satisfied with for repaying your debt, following our formal demand c. In these cases, we will intimate you in writing that we plan to give information about the debts you owe us to credit reference agencies. At the same time, we will explain to you the role of credit reference agencies and the effect the information they provide can have on your ability to get credit.
d. We may give credit reference agencies other information about the day-to-day running of your account if you have given us your permission to do so.
e. We will provide you with a copy of the information that we have given to the credit reference agencies about you, or provide their leaflets that explain how credit referencing works.
Loan Products:
We will supply authenticated copies of all the loan documents executed by you at our cost along with a copy each of all enclosures quoted in the loan document on request.
R.B.I. Guidelines on Fair Practices Code for Lenders Dt. 5.5.2003.
Loan appraisal and terms/conditions:
c. A copy of the loan agreement along with a copy of each of all enclosures quoted in the loan agreement should be furnished to the borrower.
(iii) Disbursement of loans including changes in terms and conditions:
Lenders should ensure timely disbursement of loans sanctioned in conformity with the terms and conditions governing such sanction. Lenders should give notice of any change in the terms and conditions including interest rates, service charges etc. Lenders should also ensure that changes in interest rates and charges are effected only prospectively.
9) It is not in dispute that opposite party bank is also a Member to Ex. A26. Under the caption changes in interest rates there is a mention We will inform you when we change interest rates on our products.. In Ex.
A27 at page 87 it was mentioned Lenders should give notice of any change in terms and conditions including interest rates, service charges etc. Lenders should also ensure that changes in interest rates and charges are effected only prospectively.. Under the caption of Loan Products at page 21 (d) of Ex. A26 there is a mention that We will supply authenticated copies of all the loan documents executed by you at our cost along with a copy each of all enclosures quoted in the loan document on request.
10) Despite the fact that she has been requesting for sending these copies as mentioned above, the bank did not send these statements of accounts at any time or at least the documents sought by the complainant at any time. The complainant in fact pointed out that despite the fact that the bank had adjusted Rs. 10,581.87 through electronic clearing service vide Ex. A24 towards principal on 15.6.2009 instead of Rs. 15,534.29 as per final loan repayment schedule Dt. 22.5.2005 it did not do so.
The complainant had noted the following discrepancies in the statement. According to her, even after reduction in rate of interest in 7/2009 vide Ex. A30, the bank had taken loan repayment as follows vide Ex. A28.
1) July, 2009: Principal taken Rs. 11,195.07 instead of more than Rs. 16,331.06.
2) July, 2009: Interest taken Rs. 22,960.93 instead of less than Rs. 18,460.94
3) Aug, 2009; Principal taken Rs. 9,592.28 instead of more than Rs. 15,906.41
4) Aug, 2009; Interest taken Rs. 24,563.72 instead of less than Rs. 18,885.59
5) Sep, 2009: Principal taken Rs. 12,670.69 instead of more than Rs. 16,092.17
6) Sep, 2009: Interest taken Rs. 21,485.31 instead of less than Rs. 18,699.83
11) The bank did not dispute these discrepancies in calculations. All this discussion is unnecessary after coming to know of their mistake, and in view of repeated demands by the complainant, it had forced to rectify by crediting Rs. 1,86,606/- towards principal of mortgage loan in the account of the complainant. A perusal of correspondence would show that the complainant has been all through protesting that the bank has been flouting the rules and in spite of it, the bank undaunted crediting wrong amounts towards EMI making her to pay huge amounts.
This cannot but be termed as deficiency in service. Exfacie their conduct reveal utter disregard for banking norms and rules. We do not intend to pass any strictures by using harsh language against a reputed bank. It is unfortunate that the bank has been indulging in unfair trade practice if we may say so by cheating the customers. This unfortunate conduct on the part of the bank not conforming to the terms and conditions of the agreement speaks volumes. The complainant is admittedly a sole proprietrix operating the loan account. At any rate, the contention that it was for commercial transaction has no basis.
12) Banking services are considered as Service as defined u/s 2(1)(o) of the Consumer Protection Act. Having offered these services to the complainant, they made her to suffer mental agony. Unable to stomach persistent protests she was made to pay huge amount of Rs. 1,86,606/- for a loan of Rs. 25 lakhs. This is a huge amount for which the bank is liable to pay compensation. Considering the nature of transaction and the attitude of the bank towards customers and not following the banking norms prescribed by RBI, we are of the opinion that the complainant was entitled to a compensation of Rs. 1 lakh. Later on, a sort of settlement it corrected the mistake. However, when the complainant insisted for compensation of Rs. 1 lakh the bank refused to pay stating that the demand is disproportionate to the delay and that they were not in a position to pay the said compensation. However considering the nature of deficiency in service on the part of bank, we feel that a compensation of Rs. 1 lakh could be granted which we feel reasonable and modest in the circumstances of the case.
13) In the result the complaint is allowed in part directing the opposite party bank to pay Rs. 1 lakh towards compensation besides calculate the rate of interest as per the guidelines issued to the bankers, and furnish statement of account as enjoined by rules together with costs of Rs. 10,000/-. Time for compliance four weeks.
1) _______________________________ PRESIDENT
2) ________________________________ MEMBER Dt. 17. 12.
2009.
APPENDIX OF EVIDENCE WITNESSES EXAMINED FOR COMPLAINANT OPPOSITE PARTY None None DOCUMENTS MARKED FOR COMPLAINANT:
Ex. A1; 12.10.2006 I.T. Return Acknowledgement of complainant.
Ex. A2; 25.09.2006 Letter of OP to complainant regarding Home Loan Ex. A3; 25.09.2006 Loan repayment schedule Ex. A4; 30.01.2009 E-mail of complainant to OP.
Ex. A5; 31. 01.2009 E-mail of Op to complainant Ex. A6; 04.02.2009 E-mail of complainant to OP.
Ex. A7; 06.02.2009 E-mail of complainant to OP.
Ex. A8; 12.02.2009 E-mail of Op to complainant Ex. A9; 11.02.2009 E-mail of Op to complainant Ex. A10; 06.03.2009 Letter of complainant to OP.
Ex. A11; -- Visiting Card of D.V.N. Prasad Relationship Manager of OP bank.
Ex. A12; 01.04.2009 Letter of OP to complainant Ex. A13; 23.04.2009 Letter of OP to complainant.
Ex. A14; 24.04.2009 E-mail of Op to complainant Ex. A15; 28.04.2009 E-mail of Op to complainant Ex. A16; 30.04.2009 E-mail of Op to complainant Ex. A17; 05.05.2009 E-mail of Op to complainant Ex. A18; 04.05.2009 Loan Repayment Schdule.
Ex. A19; 11.05.2009 E-mail of complainant to OP.
Ex. A20; 19.05.2009 E-mail of complainant to OP.
Ex. A21; 27.05.2009 E-mail of Op to complainant Ex. A22; 27.05.2009 E-mail of complainant to OP.
Ex. A23; 02.06.2009 E-mail of complainant to OP.
Ex. A24; 16.07.2009 Statement of account relating to complainant Ex. A25; 22.05.2009 Loan Repayment Schedule.
Ex. A26; July, 2006 The Banking Codes & Standards Board of India guidelines relating to Code of Banks Commitment to Customers of OP bank.
Ex. A27; 05.05.2003 RBI guidelines on Fair Practices Code for Lenders.
Ex. A28; 21.09.2009 Statement of account relating to complainant Ex. A29; 17.03.2009 Statement of account relating to complainant Ex. A30; 09.07.2009 Letter of OP to complainant informing reduction in Term Loan interest rate.
DOCUMENTS MARKED FOR OPPOSITE PARTY : Nil
1) _______________________________ PRESIDENT
2) ________________________________ MEMBER Dt. 17. 12. 2009.
*pnr UPLOAD O.K.