Bs Reporter / New Delhi August 30, 2008, 3:51 IST
Citibank today moved the Supreme Court challenging the order of the National Consumer Commission, which imposed restrictions on charging interest at rates in excess of 30 per cent from credit card holders.
According to the bank’s counsel, R S Suri, the Reserve Bank of India (RBI) was the only authority to regulate the fixing of interest rates. Therefore, the commission had no jurisdiction to pass an order directly to the banks.
There was no ‘unfair trade practice’ as defined in the Consumer Protection Act since there was no misrepresentation. The customers signed the agreement after reading the terms. Moreover, there was no interest if the payment is made within 60 days, Suri said.
On a few petitions by public interest groups, the commission had ruled that the charging of heavy interest by banks for card holders’ failure to make full payment or pay the minimum amount on the due date was an unfair practice.
The commission also ruled that penal interest can be charged only once for one period of default and shall not be capitalised. While observing that charging of interest with monthly rates was also an unfair trade practice, the commission directed the banks to stop the practice.
Citibank was one of the banks against which the order was passed. The other banks were Standard Chartered Bank, American Express and HSBC. The RBI was also asked to see that the banks complied with its directions.
Even after the order of the commission, the banks have reportedly raised the interest rates on defaulting card holders. Counsel Suri mentioned before a bench headed by Justice B N Agrawal that the bank feared contempt of court petition against it. The court then fixed September 8 for a full hearing of the appeal.