Interest rate: Borrowers don’t have to be told individually about change in rates: Consumer court

The national consumer court has ruled that banks are not required to inform each borrower individually about any automatic change in interest rates under the floating rate plan, as borrowers have already agreed to any such increase or decrease while executing loan agreements with lenders.

Such intimation on a bank’s website will be considered as a deemed notice, the National Consumer Disputes Redressal Commission (NCDRC) said, in a landmark ruling that will have a bearing on bank-customer relations.

NCDRC presiding member Dinesh Singh and member Karuna Nand Bajpayee, while setting aside a state consumer court order that had held to the contrary, said that “a bank can increase or decrease the rate of interest under the floating rate of interest provided for in the loan agreement executed between the bank and the complainant (borrower) and any additional or further consent from the latter was not required, the same having already been agreed to in the loan agreement itself.”

“… findings of deficiency or unfair trade practice on the part of the bank cannot sustain,” it held in the ICICI Bank vs Vishnu Bansal case.
NCDRC also said that the bank in this case had meticulously researched and pointed out the dates of placing the relevant notifications on its website and the dates of sending the reset letters to the complainant even though they relate to the period 2006 to 2008.

However, the bank through its counsel Sumit Goel told the Commission that it was ready to pay ₹1 lakh to the complainant as a goodwill and service gesture, without any acceptance or concession of ‘deficiency’ or ‘unfair trade practice.’ The national consumer forum also directed the state commission to release the amount deposited by the bank with interest to the complainant.

The national commission’s order can be appealed before the Supreme Court.

The judgment came on an appeal by the ICICI Bank against the Delhi consumer commission’s order in May last year which held that banks cannot change home loan interest rates without taking the borrowers’ consent and any automatic change in interest rates amounts to “unfair trade practice”.

The state forum had further made it mandatory for the banks to seek their consent whenever interest rates of home loans were being changed under the floating rate of interest plan. ICICI Bank had appealed against this order before the national forum.

ICICI Bank argued that the interest rate and the number of equated monthly instalments were increased only in terms of the loan agreement which provided for floating rate of interest and the complainant had signed the same after reading, understanding and agreeing to its contents.

The bank increased or decreased the rate on the basis of its uniform policy in this regard and the same was applicable on all similarly placed borrowers including Bansal.

ICICI Bank counsel Goel further argued that the state commission’s observations that increasing the rate of interest was an ‘unfair trade practice’ is patently bad both in fact and law and is totally uncalled for and ought to be explicitly washed out.

However, the complainant submitted that had the bank intimated him about the increase in the interest rates and the EMIs, he would have taken steps to get his loan transferred to another bank with a lower rate of interest.