Finance company fined for taking foreclosure costs: The Tribune India
Tribune press service
Chandigarh, October 8
The State Consumer Disputes Redressal Commission, Chandigarh, ordered a finance company to reimburse Rs 65,796 which was billed as the foreclosure amount to a consumer.
The Commission also ordered the company to pay compensation of Rs 50,000 for causing harassment and legal costs.
Ravinder Singh Barara, a resident of Ambala, approached the Commission with a complaint that he had taken out a loan of Rs 24,14,478 from India Infoline Finance Limited. The interest rate was set at 10 percent with a monthly payment of 25,946 rupees. The loan term was set from August 5, 2016 to July 5, 2031.
Barara said he approached the company to settle all outstanding dues on July 2, 2019. However, the company asked him to deposit Rs 65,796.41 as a foreclosure fee by letter dated June 4, 2019. He asked the company not to take foreclosure costs, but to no avail. Eventually, he had to deposit the entire amount under compelling circumstances.
The company, however, has denied all charges. She claimed that a loan agreement had been entered into between the complainant, co-borrowers and the company. The agreement contained a clause relating to prepayment charges in the event of foreclosure of the loan by the borrower.
The company said the foreclosure fee / prepayment penalty on premature loan closure was properly billed by the plaintiff and his co-borrowers.
After hearing the arguments, the Commission, composed of President Judge Raj Shekhar Attri and Members Padma Pandey and Rajesh K Arya, said that the Reserve Bank of India issued a notification on August 2, 2019. In accordance with the Notice, NBFCs will not take any foreclosure fees / prepayment penalties on any variable rate term loan sanctioned for purposes other than business to individual borrowers with or without co-obligated (s).
The Commission said the action of the opposing party (company) in levying a foreclosure fee / pre-payment amount from the plaintiff was contrary to the RBI circular on foreclosure costs. Being an NBFC, they were required to reimburse / reimburse foreclosure fees illegally collected from the plaintiff.
In view of this, the Commission ordered the company to reimburse Rs 65,796 to the consumer along with 9% interest. The Commission also ordered the company to pay Rs 50,000 in compensation and legal costs within one month.