Apex Court Sets Aside Interest Rate Cap On Late Credit Card Bill Payments

A bench of Justices Bela Trivedi and Satish Chandra Sharma heard the petitions from banks like Standard Chartered Banks, American Express, Citibank, Hong Kong and Shanghai Banking Corporation (HSBC)

The NCDRC earlier in 2008 ruled that levying more than 30 per cent interest rate on consumers for failing to make their credit card payments in time was an unfair trade practice

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The Supreme Court on Friday set aside an order from the National Consumer Disputes Redressal Commission (NCDRC) regarding interest rates on late credit card bill payments. The court ruled that interest rates will not be capped at 30 per cent per annum for late bill payments related to credit cards.

The ruling put an end to a case which was more than a decade old. A bench of Justices Bela Trivedi and Satish Chandra Sharma heard the petitions from banks like Standard Chartered Banks, American Express, Citibank, Hong Kong and Shanghai Banking Corporation (HSBC).

The petition asked the court to decide if the NCDRC held jurisdiction to set an upper ceiling on interest rates to be charged by the lenders from the credit card holders if they fail to make payment by the due date, reported Business Standard.

Notably, the NCDRC earlier in 2008 ruled that levying more than 30 per cent interest rate on consumers for failing to make their credit card payments in time was an unfair trade practice. The body said that paying the minimum amount due was also unethical.

However, banks stated that the advising interest rate is an occupied statutory field reserved by the norms for the Reserve Bank of India (RBI) to decide on. They said that the NCDRC failed to take into account that imposing higher interest is only on defaulting customers and a compliant customer is allowed to benefit from interest-free unsecured credit for nearly 45 days, along with other costs linked to credit card business. 

In its order, the NCDRC said, “If the RBI is considered to be one of the watchdogs of finance and economy of the nation and the prevailing credit conditions are such as should invite its policy intervention, then, in our view, there is no justifiable ground for not controlling the banks, which exploit the borrowers by charging exorbitant rates of interest varying from 36 per cent to 49 per cent per annum, in case of default by the credit-card holders to pay before the due date.”