Supreme Court removes 30% cap on credit card due interest

NEW DELHI: In a verdict that would have a direct and significant impact on millions of consumers, mostly middle-class, the Supreme Court set aside a 16-year-old cap on the interest rate on credit card dues that the National Consumer Disputes Redressal Commission (NCDRC) had placed on banks. The apex court said banks can charge more than 30 per cent interest.

In July 2008, the commission had held that annual interest rates ranging between 36 per cent and 49 per cent were exorbitant and amounted to the exploitation of borrowers. But hearing appeals filed by Citibank, American Express, HSBC and Standard Chartered Bank, a bench of Justices Bela M Trivedi and Satish Chandra Sharma said NCDRC's verdict was "illegal" and an interference with the clear, unambiguous delegation of Reserve Bank of India's powers.

The banks had not made any misrepresentation to deceive credit card holders and the pre-conditions of "deceptive practice" and unfair method were manifestly absent, it said, adding that NCDRC had no jurisdiction to rewrite the mutually agreed terms of the contract entered between the banks and consumers.

In its December 20 judgment, the bench said it agreed with the RBI’s submissions that the question of directing it to act against any bank did not arise and that there was no question of the RBI being directed to impose any cap on the rate of interest, either on the banking sector as a whole or any particular bank.

"The credit card holders are duly educated and made aware of their privileges and obligations, including timely payment and levying of penalty on delay," the bench said.

It court said customers were made aware of the most important terms and conditions, including the rate of interest, at the time of availing of the credit card facility.