Delhi consumer commission has pulled up a bank for increasing a home loan interest rate without properly informing the borrower.
The bank has been ordered to refund Rs 12.91 lakh along with interest and pay compensation and litigation costs.
Highlights
- Home loan interest rate was increased from 12% to 16.5%.
- The borrower had taken a Rs 50 lakh home loan in 2005.
- Loan tenure was originally 120 months.
- Bank was ordered to refund Rs 12,91,248 collected in excess.
- Refund will carry 6% annual interest from June 2017.
- Bank must also pay Rs 1 lakh compensation and Rs 50,000 litigation costs.
New Delhi: A bank cannot simply increase the interest rate on a home loan without properly informing the borrower. In a significant consumer ruling, the Delhi State Consumer Commission has directed a bank to refund Rs 12.91 lakh that was allegedly collected in excess after the interest rate on a customer’s home loan was increased.
According to the report, a Delhi resident had taken a Rs 50 lakh home loan in 2005. The original loan tenure was 120 months. However, the borrower alleged that the bank later increased the applicable interest rate from 12% to 16.5% without properly informing him.
The change had a major impact on the customer’s repayment burden. The borrower claimed that the loan tenure was also extended substantially and that the higher interest rate resulted in excess recovery by the bank.
The consumer commission found fault with the way the interest-rate change was communicated. It observed that customers should be properly informed about such changes and that merely making information available through general channels may not be enough when the change directly affects a borrower’s financial liability.
The commission directed the bank to refund Rs 12,91,248 collected in excess from the borrower. It also ordered payment of 6% annual interest from June 2017 on the amount.
The financial relief does not stop there. The bank has also been directed to pay Rs 1 lakh as compensation for the mental harassment and financial hardship caused to the customer. Another Rs 50,000 has been awarded towards litigation expenses.
The ruling could be important for other home loan borrowers as floating interest rates can change during the loan tenure. While lenders may revise rates according to the terms of a loan agreement, borrowers should receive appropriate information about changes that affect their EMIs, interest burden or repayment period.
For home loan customers, regularly checking loan statements, applicable interest rates, outstanding principal and remaining tenure can help identify unexpected changes early.
