DISTRICT CONSUMER DISPUTES REDRESSAL FORUM, PALAKKAD
Dated this the 23rd day of November 2020
Present: Sri.V.P.Anantha Narayanan, Member(President I/c)
: Smt.Vidya.A, Member Date of Filing: 30/01/2018
CC /16/2018
Moosa,
S/o.Kunhibhava, - Complainant
Vazhakkulam Veedu,
Anakuzhikad,
Malampuzha, Palakkad.
(By Adv.M.C.Kuriachan)
V/s
The Manager,
UCO Bank Palakkad Branch, - Opposite party
Market Road,
(By Adv.C.Mohanram)
O R D E R
By Smt.Vidya.A, Member
Brief facts of the complaint
The complainant had availed a housing loan for an amount of Rs.8 lakhs from the opposite party bank in the year 2011. The loan amount along with interest was agreed to be repaid in equal monthly installments of Rs.10,000/-. But due to some unavoidable reasons, he was unable to pay some installments; but later he repaid the dues and regularized the loan and thereafter started repaying it regularly. But later on, when the complainant checked his loan pass book, he was shocked to find that charges amounting to Rs.35,410/- was recovered from his account by the opposite party under various heads such as recovery commission, recovery charges, recovery claims, process charges and legal charges. There was no such circumstances requiring the recovery of that amount from the complainant. The opposite party bank had not initiated any recovery proceedings against the complainant and there is no reason for the opposite party to recover such amount from him under various charges.
Further the interest rate at the time of taking the loan was 10.6%. But Reserve Bank of India had revised the interest rate from 10.6% to 8.6% from March 2017. The opposite party had collected interest at the rate of 10.6% from the complainant upto October 2017 even after the complainant’s repeated requests. Thus an amount of Rs.1,110/- per month was illegally collected from the complainant from March to October 2017. The complainant is entitled to get the excessive amount Rs.8,880/- to be credited to his loan account. The complainant had sent a letter on 24/10/2017 requesting the opposite party to credit the excess amount to his account, but nothing was done by the opposite party. Then the complainant directly approached the opposite party and he was informed that all excess amount has been debited under various heads by the opposite party bank and the same cannot be refunded. These kinds of acts amount to deficiency in service on the part of the opposite party and it had caused great mental agony and trouble to the complainant. The complainant was regularly repaying the loan amount from his hard-earned money. The acts of the opposite party in recovering an amount of Rs.35,410/- from the complainant under various heads is illegal. The complainant is entitled to get that amount with interest from the opposite party. Hence this complaint is filed for getting an order directing the opposite party to credit the illegally recovered amount Rs.35,410/- with interest and the excess amount of interest collected from March 2017 to October 2017 amounting to Rs.8,880/- to the loan account of the complainant and to pay an amount of Rs.10,000/- as compensation for the mental agony and inconvenience suffered by him.
Complaint admitted and notice issued to the opposite party. The opposite party entered appearance and filed their version.
Version of opposite party:
The opposite party admitted that the complainant had availed a housing loan from the opposite party on 2011 as per loan account No.07600610012178. But the amount borrowed as per the opposite party is Rs.8,23,000/-. Eventhough in the loan application, the complainant had agreed to repay the loan amount of Rs.8,00,000/- with an EMI of Rs.10,000/-, as per the contract between the complainant and the opposite party, the complainant is liable to pay the loan amount of Rs.8,23,000/- with an interest of 11.25% per annum with an EMI of Rs.9,700/- per month from February 2012 onwards. The opposite party denied the averments in the complainant regarding the complainant’s regular repayment of the loan amount. According to the opposite party, from June 2012 onwards, the complainant was a chronic defaulter and was not paying the installments regularly. He paid Rs.12,000/- on 02/05/2012, Rs.15,000/- each was paid on 29/10/2012 and 10/01/2013. No payment was made on June 2013, September and October 2013. Further no payment was made during February 2014 to May 2014. Since the complainant was making such a huge default, the bank was forced to appoint the recovery agents to collect the amount due to the bank. Because of their efforts, the complainant had paid Rs.50,000/- on 30/06/2014 and for that an amount Rs.3,500/- was paid as recovery commission.
Again the complainant defaulted repayment on July and August 2014 and the recovery agents were appointed to collect the amount. As a result a payment of Rs.25,000/- was made by the complainant on 15/09/2014 for that a recovery commission of Rs.1,750/- was paid on 01/01/2014. Then from 15/09/2014 to 25/02/2015, there was no loan repayment by the complainant. Because of this, recovery agents were again appointed to collect the defaulted amount and they visited the complainant’s house several times and because of their effort, the complainant repaid Rs.50,000/-. For that, a recovery commission of Rs.3,500/- was paid on 06/03/2015. Even thereafter the recovery agents were deputed to collect the outstanding loan defaulted amount and the complainant paid Rs.70,000/- on 07/04/2015 for which a recovery commission of Rs.4,500/- was paid on 04/05/2015.
After this the complainant did not make any repayment till 13/11/2015 and again because of the efforts of the recovery agents the complainant made a payment of Rs.75,000/- on 13/11/2015 for which a recovery commission of Rs.4,750/- was paid on 03/12/2015. Again an amount of Rs.75,000/- was recovered from the complainant on 31/12/2015 by the effort of the agents for which an amount Rs.4,750/- was paid as commission on 05/01/2015. Further in order to collect the arrears, agents were deputed and they were able to recover Rs.12,000/- each on 02/02/2016, 01/03/2016, 04/04/2016, 04/05/2016, 03/06/2016, 04/07/2016 and 01/08/2016 respectively from the complainant. For that an amount of Rs.840/- was paid on 04/03/2016, 08/04/2016, 13/05/2016, 02/06/2016, 02/07/2016, 04/08/2016 and 06/09/2016 respectively.
Further an amount of Rs.20,000/- was recovered on 03/11/2016 for which an amount of Rs.1,400/- was paid as recovery commission on 02/12/2016. Again in December 2016 due to the efforts of the agents an amount of Rs.12,000/- each was paid on 03/01/2017 and 02/02/2017 for which a commission of Rs.840/- was paid on 01/03/2017. Again for collecting the due amount on March 2017 and previous arrears, agents were deputed and an amount of Rs.20,000/- was paid by the complainant on 07/04/2017 for which a commission of Rs.1,400/- was paid on 05/05/2017. In order to recover the arrears, agents were again appointed and an amount of Rs.12,000/- each was remitted by the complainant on 10/05/2017 and 03/06/2017 and a commission of Rs.840/- each was paid on 05/06/2017 and 10/07/2017. Again an amount of Rs.22,000/- was paid by the complainant on 02/09/2017 due to the persuasion of the recovery agents on 02/09/2017 and Rs.15,000/- on 07/09/2017 for which a recovery commission of Rs.2,590/- was paid by the complainant on 05/10/2017.
The statement of account maintained by the bank will clearly show that the amount charged by the bank was correct and the amount was paid only for the work of the recovery agents. Since the complainant was a chronic defaulter, the bank had no option other than to depute the recovery agents to collect the amount for which they are entitled to get recovery commission and charges. Lump sum payments were made by the complainant on various occasions only because of the efforts of the collection agents. The bank has taken only Rs.500/- for sending legal notice intimating the default. All other averments in the complaint regarding the collection of charges under various heads are denied by the opposite party. According to the opposite party, the complainant is also liable to pay processing fee of 0.5% of the loan amount for a minimum of Rs.1,000/-and the bank had not collected any excess charges as alleged in the complaint.
The allegation in the complaint that the rate of interest at the time of taking the loan was 10.6% is not correct; on the other hand it was 11.25%. Subsequently on 01/04/2016, the entire banking system has changed the interest rate from base rate to MCLR(Marginal Cost of Fund Based Lending Rate) and it was given wide publicity through website and displayed in notice board.
The customers were able to change to the MCLR rate after paying a fee of 0.5% of the outstanding balance of loan amount after clearing the entire over dues. The Bank’s MCLR was 9.55% and it was changed to 8.60% from 10/10/2017 only. Since the account of the complainant was irregular for that period several times, it was not possible to change the MCLR. So the complainant is not entitled to get any reduction in the interest rate. Subsequently he has regularized the payment and thereafter the bank was charging only 8.6% as per MCLR. So the complainant’s claim that the Bank has collected excess amount of Rs.1,110/- from March to October 2017 and that has to be credited to his loan account is not correct. The opposite party admits that the complainant made a request to adjust the aforesaid amounts, but the same was denied by them on the ground that the complainant is not legally entitled to.
The allegation that the opposite party has collected excess service charges and it amounts to cheating and deficiency in service and the complainant had suffered mental agony is not correct.
The allegation that the complainant was repaying the amount regularly and promptly out of his income and the excess amount collected as stated in the complaint is illegal and the complainant is entitled to get back the excess sum collected amounting to Rs.35,410/- and also the difference in interest amounting to Rs.8,800/- and compensation of Rs.10,000/- is incorrect and denied. The complainant is not entitled to any sum as claimed in the complaint and the complaint is devoid of any merits and it has to be dismissed with cost to the opposite party.
From the side of the complainant, chief affidavit filed. Ext.A1 marked. Complainant is examined as PW1. From the side of the opposite parties chief affidavit filed along with documents. Ext.B1 to B6 were marked(B1 to B4 in series) and Senior Manager, UCO Bank(Opposite Party) is examined as DW1 and recovery agent of opposite party was examined as DW2.
Main issues arising for consideration are:
- Whether there is any deficiency in service on the part of the opposite party Bank?
- If so, what is the relief as to cost/Compensation?
Issues 1&2
Heard both parties. We have perused the chief affidavits, documents and written arguments filed by both parties.
From Ext.B2, the loan agreement between the parties, it can be seen that the amount of loan is Rs.8,23,000/- with 11.25% interest per annum which has to be repaid in 174 EMI of Rs.9,700/- each commencing from September 2011. From Ext.B3, the bank statement, it is clear that the complainant was regularly repaying the amount, upto May 2012.
Eventhough the complainant had defaulted the EMI for certain months, he covered it by making deposits in lump sum subsequently.
In Ext.B2, loan agreement, it is clearly mentioned under the heading 2.7. Delay in payment of EMI etc. clause(b)”. The delay in payment of EMI or PEMI shall render the borrower liable to pay additional interest as per the rule of the bank in that behalf as in force from time to time.”
From the bank statement produced by the bank and marked as Ext.B3, it can be seen that penal interest are charged in addition to normal interest charged for the delayed payments.
Moreover in case of default of payment, first the bank has to resort to their own recovery proceedings including sending ‘demand notice’ to the borrower clearly mentioning the dues, interest and other details. In this case no such “demand notice” has seen produced by the bank. From the deposition of DW1, the Senior Manager of opposite bank. “loan default sNbvXm I£nbv¡v loan repay sN¿phm\mbn letter Abbv¡pw. Ahsc loan default Bbn Adnbn¡pw. Cu tIkn demand letter Ab¨Xnsâ acknowledgement Dmhmw. B tcJ tImSXnbn lmPcm¡mXncn¡m³ {]tXyIn¨v ImcWsam¶panÃ. AXp Ignªn«v I£n¡v F{X {]mhiyw demand notice Ab¨p F¶Xns\¡pdn¨v F\n¡dnbnÃ.”
The witness further adds that “Notice Ab¡phm\mbn A\ymb¡mc\nÂ\n¶v legal chargessâ hIbn Ipd¨v cq] CuSm¡nbn«pv. A§ns\ \nba\S]SnIÄ A\ymb¡mc\v FXncmbn FSp¯Xnsâ Hcp tcJIfpw lmPcm¡nbn«nà F¶p ]dªm icnbmWv.” So it is clear that in this case no demand notice had been issued to the complainant to repay the defaulted installments and to make the loan regular.
Hence it is evident that the bank had not initiated any recovery proceedings against the complainant and they have not produced any document to show that legal action was taken against the complainant when default in payment was made by him. They have debited Rs.500/- from the complainant’s account as legal charges.
So there is a clear deficiency in service on the part of the bank in not intimating the customer about the details of the dues that are to be paid by him and the consequences of non-payment of the loan within time.
Further the opposite party bank has charged interest and penal interest in this case for the delay in payment. So it is not proper on the part of the bank to appoint recovery agents in the present case to recover the amount from the complainant.
The contention of the opposite party bank that whatever amount charged by the bank as recovery commission was correct and the amount was paid only for the work of the recovery agents cannot be accepted. Because if the bank appoints recovery agents for collecting the outstanding dues in genuine cases, it is for the bank to pay them; it cannot be debited from the account of the customer without his permission. Further, the contention of the bank that they had no other option other than to appoint recovery agents for which they are entitled to get recovery commission and charges as per memorandum of understanding between the bank and the recovery agents is not justifiable at all. Here no demand notice was issued to the complainant and his account was not declared ‘NPA’. In such a case, there is no necessity to take such coercive steps. Further, the Reserve Bank of India guidelines says that the Banks should give, reasonable time to pay up and also forbids using ‘muscle power’ to recover loans. There is laid down code of conduct which banks need to adhere.
So there is a clear deficiency in service on the part of the bank in debiting the recovery commission and charges of the recovery agents from the loan account of the complainant. The complainant is entitled to get that amount of Rs.35,410/- which was debited from his account together with interest.
Because of the deficiency in service on the part of the opposite party Bank, the complainant suffered mental agony. He was really shocked to see the withdrawal of the amount of Rs.35,400/- from his account under various heads as per the complaint. Debiting the account of a person with such a huge amount without notice would have definitely caused mental agony to the complainant for which the opposite party Bank had to compensate him.
Then regarding the second part of the complaint, the complainant’s contention is that the interest rate at the time of taking the loan was 10.6%, the interest rate was revised by Reserve Bank of India in the month of March, 2017 from 10.6% to 8.6% but the opposite party continued to collect interest at the same rate from March to October 2017. Thus an excess amount of Rs.8,800/- was collected by the bank from the complainant for that period.
It is clear from Ext.B2 loan agreement that the interest rate at the time of taking the loan was 11.25%. The opposite party had admitted that the interest rate was revised and on 01/04/2016, the entire banking system has changed the interest rate from base rate to MCLR. The customers were able to change to MCLR rate after paying a fee of 0.5% of the outstanding balance of loan amount after clearing the entire dues.
From the circular issued by Reserve Bank of India, it can be seen that Reserve Bank of India implemented MCLR on 01/04/2016 to determine the rate of interests for loans. MCLR replaced the earlier base rate system to determine the lending rates for commercial banks. It is pertinent to note here that it is an internal reference rate for banks to determine the interest they can levy on loans. Here in this case it can be seen that the loan account of the complainant was irregular in that period several times. According to the opposite party Bank when the complainant regularized the payment after clearing his dues, the bank started charging interest at the rate of 8.6% as per MCLR.
As per Reserve Bank of India circular, banks are allowed to charge a risk premium from borrowers. If the credit score undergoes substantial changes, the bank can revise the risk premium charged on the home loan. Hence the Bank’s contention is acceptable.
So the second part of the complaint for directing the opposite party to credit Rs.8,800/- as excess interest collected to his loan account stands dismissed.
In the result, the complaint is partly allowed. The opposite party is directed to refund Rs.35,410/-(Rupees Thirty Five Thousand Four hundred and Ten only) together with interest charged thereon to the complainant and Rs.5,000/-(Rupees Five Thousand only) as compensation for the mental agony and inconvenience suffered by him.
The order shall be executed within 30 days from the date of receipt of this order; otherwise complainants are also entitled to get interest @ 9% per annum on the total amount due to them from the date of this order till realization.
Pronounced in the open court on this the 23rd day of November 2020.
Sd/-
V.P.Anantha Narayanan
Member(President I/c)
Sd/-
Vidya.A
Member
Appendix
Exhibits marked on the side of complainant
Ext.A1 – Photo copy of bank pass book issued by opposite party.
Exhibits marked on the side of Opposite parties
Ext.B1(series)B1(a) – Loan application form
Ext.B1(b) – Copy of sanction letter
Ext.B2 – Copy of loan agreement
Ext.B3 – Copy of statement of account for loan.
Ext.B4(series)B4(a) – Statement of account for the period of 29/07/2011 to 21/03/2018
Ext.B4(b) – Certificate issued by branch Manager
Ext.B5 – True copy of letter issued by the opposite party dated 16/02/2020
Ext.B6 – Statement of account in the name of Honest Associates dated 14/11/2018
Witness examined on the side of complainant
PW1 – Moosa
Witness examined on the side of opposite parties
DW1 – Anoop.K.V
DW2 – Abdul Hakkim
Cost : NIL
