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Consumer: Bank charged penalty for charging older customer more than newer customers




It is an established business fact that when banks give loans to their customers, they normally treat newer customers more attractively than they treat older customers. The terms and conditions of the loan specify for floating rate loan that banks can charge customers more (either by increasing the EMI amount, or the loan duration) if the interest rate regime changes. Similarly, even in the case of fixed rate loans, the bank retains the right (if you read the complete legalese of the loan terms, you can confirm) to change the fixed rate loans if the rate of interest changes by a certain amount. This changing of fixed interest rate has not been challenged, however, somebody challenged the fact that they were being charged more than new customers, treating that as a unlawful practice. This was accepted by the consumer forum which fined the bank (link to article):

Imposing a penalty of Rs one lakh, which the bank will pay to Goyal, the forum said, ‘The bank is directed to overhaul accounts of all its loanees and bring the rate of interest at par with those at which the loan (home) is advanced to new customers from time to time, so that all its customers, whether old or new, who have opted for adjustable rate of interest pay the same rate of interest during any particular period.’

Arguing before the forum, Goyal’s counsel stated that the finance company and bank adopted unfair trade practice by increasing rate of interest for old customers at a higher rate, whereas the prevailing rate of interest was much lower, which was depicted through their announcements and advertisements in the newspaper to attract new customers. After hearing the pleas, the forum held that the interest rate of any old loanee would be lowered to bring it at par with the interest rate at which the loan is advanced by the bank to its new customers.

One is not sure whether this practice is still ongoing, but one suspects that banks do continue doing this. Not too many people are aware that this has been ruled unfair by a consumer forum, and that they can challenge this practice. Most people continue to accept that whatever a bank does is acceptable.




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