Financial Firm Fined For Foreclosure: The Tribune India

Ramkrishan Upadhyay

Tribune news service

Chandigarh, October 8th

The State Consumer Disputes Redressal Commission, Chandigarh, has ordered a financial company to reimburse 65,796 rupees billed to a consumer as a foreclosure amount.

The commission also ordered the company to pay 50,000 rupees in compensation for causing harassment and legal costs.

Ravinder Singh Barara, a resident of Ambala, filed a complaint with the Commission 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 rate of Rs25,946. The loan period was set from August 5, 2016 to July 5, 2031.

Barara said he reached out to the company on July 2, 2019 to settle any outstanding fees. However, in a letter dated June 4, 2019, the company asked him to deposit 65,796.41 rupees as foreclosure fees. He asked the company not to pay foreclosure fees. but in vain. Finally, under imperative circumstances, he had to deposit the entire amount.

However, the company denied all allegations. It alleged that a loan agreement had been concluded between the complainant, the co-borrowers and the company. The agreement contained a clause regarding early repayment penalties in the event of a loan refusal by the borrower.

The company announced that the foreclosure / prepayment fees for the early closure of the loan were correctly billed by the complainant and his co-borrowers.

After hearing the arguments, the commission, comprised of President Justice Raj Shekhar Attri and Members Padma Pandey and Rajesh K Arya, said the Reserve Bank of India issued a notice on August 2, 2019. According to the notice, NBFCs will not charge any foreclosure fees. Prepayment penalties for variable-rate fixed-term loans sanctioned for non-business purposes to individual borrowers, with or without co-debtors.

The Commission stated that the approach taken by the other party (company) in collecting foreclosure fees / prepayment from the complainant was in breach of the RBI circular on foreclosure fees. As NBFC, they were required to reimburse / repay the foreclosure fees illegally charged by the complainant.

With this in mind, the commission ordered the company to reimburse the consumer 65,796 rupees along with 9 percent interest. The commission also ordered the company to pay Rs 50,000 in compensation and legal costs within one month.

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