Consumer court’s order against hefty credit card interest stayed

NEW DELHI - The Supreme Court Tuesday suspended a consumer rights panel’s verdict ordering banks to put a cap of a 30 percent annual interest rate on default payments by their credit card subscribers.

A bench of Justice B.N. Agrawal and Justice G.S. Singhvi suspended a Dec 12, 2008 ruling of the National Consumer Disputes Redressal Commission (NCDRC).

The commission’s order had sought implementation of its July 7, 2007 order, which had ruled that ‘charging of interest rates in excess of 30 percent per annum from credit card holders by banks for the former’s failure to make full payment on the due date or paying the minimum amount due, is unfair trade practice’.

The apex court suspended the order on a joint plea by Hong Kong and Shanghai Bank, Citibank and Standard Chartered bank that charging interest rates between 36 to 49 percent from credit card defaulters by them was fair.

When the banks first approached the Supreme Court in September 2008, it had not stayed the NCDRC order because the order was yet to be put in operation.

The NCDRC had ordered implementation of its July 2007 ruling on a plea by consumer rights body Awaj.

The banks in their joint appeal gave over two dozen reasons for charging high interest rates. They included the charges made on calls by the service centre for persuading people to take a credit card.

Among the other reasons that the banks cited for charging penal interest - the interest rate charged by the bank or lending institution from the borrower if he misses a repayment - included cost of processing, cost for setting up a new card in operating system, cost of courier and embossing the card, cost of providing phone banking and internet banking services, cost of sending monthly statements, cost of waiving charges for service reasons, cost of marketing and promotional offers, and cost of rewards and loyalty programmes.


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