In 2008, the NCDRC had strongly criticised banks for charging interest rates ranging between 36 per cent and 49 per cent on credit card dues. The consumer forum had observed that the Reserve Bank of India (RBI) had failed to regulate this practice.
There is disappointing news for credit card users, the Supreme Court today quashed the NCDRC’s decision to fix the interest limit on credit card dues at 30%. After which if you do not pay the credit card on time, you may have to pay hefty interest.
In a 2008 decision, the NCDRC had reprimanded banks for charging interest rates between 36 percent and 49 percent on credit card dues. The Supreme Court on Friday quashed the 2008 decision of the National Consumer Disputes Redressal Commission (NCDRC), which said that charging more than 30 percent interest on bank credit card dues would be tantamount to unfair trade practice.
This is what a two-judge bench said
The bench of Justice Bela Trivedi and Justice Satish Chandra Sharma, while giving the verdict in the HSBC vs Awaaz Foundation case, said that in view of the preceding reasons, the decision of the NCDRC is quashed. A detailed copy of the decision is awaited.
In 2008, the NCDRC had strongly criticised banks for charging interest rates between 36 per cent and 49 per cent on credit card dues. The consumer forum had held that the Reserve Bank of India (RBI) had failed to regulate this practice.
- The NCDRC had said in the direction that charging interest at a rate of more than 30 per cent per annum from credit card holders for failure to make full payment on the due date or pay the minimum amount due is an unfair trade practice.
- Penal interest for one period of default can be charged only once and will not be capitalised.
- Charging interest with monthly holidays is also an unfair trade practice.
- Therefore, banks are directed not to indulge in or repeat the above unfair trade practices.
The NCDRC found that the Reserve Bank of India (RBI) has not issued specific guidelines to limit the interest rates charged by banks on credit facilities including credit cards. This lack of regulation allowed banks to set high-interest rates, potentially exploiting consumers, especially those in vulnerable financial situations. The Commission said such practices could be considered unfair trade practice under the Consumer Protection Act.
The NCDRC emphasised the need for regulatory oversight to prevent financial institutions from charging excessive interest rates, which could lead to consumer exploitation. It highlighted that in a welfare state, financial institutions should not be allowed to exploit the financial vulnerabilities of consumers. The Commission also pointed out that although some states had laws preventing moneylenders from charging more than a particular interest rate, there was no such regulation for banks and non-banking financial companies (NBFCs) at the national level.