The Supreme Court has refused to remove the stay order which it had put on the order issued by the National Consumer Disputes Redressal Commission regarding high interest rates charged by banks to credit card holders. The order issued had forbidden banks to charge yearly interest more than 30 % to credit card holders who had forgone their due date for payment of credit card bills.
The Supreme Court bench consisting of justices GS Singhvi and TS Thakur not only refused to vacate the stay order but have also rejected the petition by an NGO named Awaz conjuring directive to banks not to charge avaricious rates of interest to credit card holders.
This NGO had filed the application to the National Consumer Disputes Redressal Commission on the basis of which it had passed the judgment against banks. "The benchmark fixed by the public and private banks for even unsecured finance is not more than 14% per annum," the application said.
The petition also said, "The banks cannot be allowed to exploit the consumer by charging higher rate of interest on account of unsecured finance and peculiar nature of credit card services. And for this very same reason, they are also charging fancy service charges. So the banks are exploiting and squeezing the cardholders from both the ends. And in totality, it comes to beyond 90% per annum in case of consistent default of 12 months."
The NGO wanted the order to be modified to the extent that, "banks cannot be permitted to charge higher/usurious rate of interest and also service charges for the same reason namely unsecured finance, ATM facility and call centers etc."
The Supreme Court had earlier put a stay on the order issued by the apex court in response to the plea of several banks like Standard Chartered Bank, Citibank, Hong Kong and Shanghai Bank and American Express Bank. The banks had opposed the accusation put on them regarding capping of interest rates and then charging them to the cardholders.
Citibank in its application said, "The facility of credit cards is availed of without any interest for a certain stipulated period and it is only after the expiry of that period that interest is levied on the credit card account for non-payment or late payment of the dues of the card holders to the credit card issuer. The credit card holder is aware of the same when applying to the credit card issuer for a credit card. It is also relevant to note that credit card transactions de-facto constitute unsecured credit availed of."
The bank also said that had banks put avaricious interest rates on their customers they would not have been able to sustain in this competitive market where every one opts for competitive pricing to attract the customer base. "It is also relevant to note that no bank as a credit card issuer would charge undue interest rates apart from the regulatory framework that applies," the bank said.