Supreme Court Strikes Down 30% Interest Rate Cap On Late Credit Card Payments
The top court has put an end to a 16-year-old litigation involving banks such as Standard Chartered Bank, Citibank, American Express, and Shanghai Bank.
The Supreme Court on Friday set aside an order of the National Consumer Disputes Redressal Commission that barred commercial banks from charging interest rates over and above 30% from credit card holders.
In doing so, the top court has put an end to a 16-year-old litigation involving banks such as Standard Chartered Bank, Citibank, American Express, and Shanghai Bank that came in appeal before the top court.
The top court’s ruling essentially means that there is no bar on the banks from charging interest rates above 30%, and the same will not count as an unfair trade practice.
In 2008, the NCDRC ruled that banks cannot charge interest rates over and above 30% from credit card holders that fail to make their payments in due time.
Permitting banks to charge excessive or usurious rates of interest would be in clear violation of public policy, the NCDRC had said.
There is no justifiable ground for not controlling the banks that exploit the borrowers by charging exorbitant rates of interest varying from 36 percent to 49 percent per annum in case the credit card holders default on payment before the due date.National Consumer Disputes Redressal Commission
It further stated that apart from charging such high interest, banks also charge commission from traders or service providers when items are purchased or when services are availed using credit cards, and this commission is eventually passed on to the purchasers, it said.
