Consumer Protection Laws for Bank-Customers

Consumer Protection Laws for Bank-CustomersThe Consumer Protection Act, 1986An Act to provide for better protection of the interests of consumers and for that purpose to make provision for the establishment of consumer councils and other authorities for the settlement of consumers' disputes and for matters connected therewith.W.e.f. April 15, 1987Extends to the whole ofIndiaexcept the State ofJammu and Kashmir.

Who can complain under the Act?"complainant" means(i)aconsumer; or(ii)anyvoluntary consumer association registered under the Companies Act, 1956 (1of 1956)or under any other law for the time being in force; or(iii)theCentral Government or any State Government,(iv)oneor more consumers, where there are numerous consumers having the same interest;(v)incase of death of a consumer, his legal heir or representative; who or which makes a complaint;

Section 2(1)(b), Consumer Protection Act, 1986.

Who is a consumer of Services? consumer of services as a persons who hires or avails of any services for a consideration including a beneficiary acting with the approval of aforementioned person.

Section 2(1)(d), Consumer Protection Act, 1986.

What is service?"service" means service of any description which is made available to potential users and includes, but not limited to, the provision of facilitiesin connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service;Section 2(1)(0), Consumer Protection Act, 1986.

Whether Bank-customer is a consumer or not? Standard Chartered Bank Ltd. v. B.N. Raman (2006) 5 SCC 727.

Vimal Chandra Grover v. Bank of India, AIR 2000 SC 2181.

Deficiency in servicedeficiency means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service. Section 2(1)(g), The Consumer Protection Act, 1986.

Deficiency in banking service:dishonour of cheque without justification, dishonour of demand draft due to employees negligent drafting, payment despite stop payment instructions, non-disbursement of sanctioned loan missing articles from bank-locker, delay in preparation of drafts/cheques, not making payment of cheque, 8Contd.refusal to pay maturity amount of STDR, refusal to grant financial assistance despite agreement, dishonour of cheque inspite of sufficient funds in account, issuance of fake foreign currency, charging higher rate of interest against terms of agreement or under RBIs directions

9Contd.refusal of payment of demand draft,wrongful freezing of saving bank account,freezing personal bank account of a person on State Governments Instructions, failure to pay the bank-guarantee, misplacing share application form, failure to return cheque within reasonable time causing loss in allotment of shares,Oriental Bank of Commerce v. Mahesh Kumar Bhatia, 1994 (2) C.L.C. 579 (S.C.D.R.C.; M.P., Bhopal).Bareilly Corporation Bank Ltd., Faridabad v. Payal Verma 1999 (1) CLT 365 (Haryana SCDRC, Chandigarh.)Malkiat Singh Bansal v. Punjab National Bank, 1998(2) CPJ 605 (SCDRC Punj.).See Infra Note 386.Chavan Rishi International Ltd. v. State Bank of Bikaner Jaipur, 1993 CLJ 579 (SCDRC, Delhi). Purshotam Nagar v. Zonal Manager, UCO Bank, Jaipur, 1994 (2) CLC 307 (N) Munish Sahni v. SBI, 1998 (1) CPJ 184 (Delhi SCDRC).Sarswati Chaudhary v. American Express Bank Ltd., 1998 (1) CPJ 213 (SCDRC., New Delhi); See also, Oriental Bank of Commerce v. Bruno Knitwears, 1998 (1) C.P.J. 296 (Punjab S.C.D.R.C.); Ram Singh v. P.N.B. 1998 (1) CPJ 355.10What is held not to be deficiency in banking service?levying charges for the issue of cheque book, not providing banking services due to strike by employees, non-sanction of loan, dishonour of cheque under rules, adjustment of loan according to terms of agreement, encashing cheque certified as good for payment, Catholic Syrian Bank v. Sanju Mathew, III (1995) C.P.J. 137.Federal Bank, Bistupur, Jamshedpur v. Shri Bijon Mishra, I (1991) CPJ 16.Manager, UCO Bank v. S.C. Mohanty (1996) CPJ 259 (Orissa S.C.D.R.C.); Syndicate Bank v. Borrowers, III (1994) CPJ 425 (SCDRC); D. Penchalaiah v. Branch Manager, Syndicate Bank, III (1994) C.P.J. 318 (SCDRC); Natraj Borewell Services v. Assistant General Manager, Indian Bank, 1994 (1) CPR 697; Uhgra Mohan Jha v. Dighra, Zonal Manager, Central bank of India 1994 (2) CLC 413 (SCDRC, Bihar, Patna); Supreme Builders v. Veer Seva Urban Cooperative Bank Ltd., 1998 (1) CLT 209; Syndicate Bank, Branch Gurgaon v. Sanjay Kumar, 1998 (2) C.L.T. 229 (Haryana S.C.D.R.C., Chandigarh). Dream Dcor v. SBI, 1999 (1) CLT 392 (Goa SCDRC, Panaji).Canara Bank Hoshiarpur v. Lal Singh Anjal, 1998 (2) C.L.T. 586.Union Bank of India v. Prashant International, 1998 (2) C.L.T. 599 (Haryana S.C.D.R.C. Chandigarh).Special Machines v. P.N.B., 1994 (2) CLC 333 (NCDRC, New Delhi).

11Contd.failure to provide financial assistance to small scale industries, non-return of pledged documents when some amount remained due, mistake in calculation of interest by bank manager, not honouring cheque or not issuing draft due to non-completion of formalities by complainant, refusal to pay maturity value of FDR due to pending CBI investigation regarding that account,

SBI v. Hukum Chand Dhingra, 1994 (2) CLC 417 (Bihar SCDRC, Patna).Bharat Gyan Vigyan Samiti v. New Bank of India, 1994 (2) CLC 642.Bhupinder Kumar Sharma v. National Research Development Corporation, 1994 (1) CPJ 118 (NCDRC, Delhi).Harlal Das v. Manager, United Bank of India 1998 (2) C.P.J. 256 (W.B.S.C.D.R.C.).

12Contd.stopping payment on drawers instructions, not stopping payment on instruction of purchaser of draft (as payee alone is entitled to stop payment),

returning cheque on the ground that signature differedArunasameer Associates (P) Ltd. v. Regional Manager, SBI, I, (1995) C.P.J. 208 (NC); C. Balakrishnan v. Canara Bank III (1995) C.P.J. 218 (S.C.D.R.C.).A.A. Abdu v. Branch Manager, Canara Bank, 1998 (1) CPJ 86 (Ker. SCDRC).Lal Chand v. Chief Manager, P.N.B., I (1995) C.P.J. 68 (NC).

13Banking Ombudsman SchemeFirst introduced by RBI in 1995Revised in 2002 to cover the RRBs and to permit review of the Banking Ombudsmans decision by RBI A revised Banking Ombudsman Scheme, 2006 issued with effect from January 1, 2006.Now, applicable to all commercial banks, RRBs, SBI, subsidiaries of SBI and Scheduled Primary Cooperative Banks.

Banking Ombudsman Scheme, 2006covered new areas such as credit card complaints, deficiencies in providing promised services even by banks sales agents, levying service charges without prior notice to customer and non-adherence to the fair practices code as adopted by individual banks. fully staffed and funded by the RBI instead of the banks, and the bank customers were allowed to file complaints in any form, including online.Amended in 2007 and 2009.amendments in 2007 and 20092007- effective changes in the compliance of Banking Ombudsmans award, and appeal against the award.2009- internet banking, non-adherence to the provisions for the fair practice Code for lenders or the Code of Banks Commitment to Customers issued by BCSBI, non-observance of the RBIs guidelines on engagement of recovery agents by banks, compensation up to Rs. One Lakh in case of complaints arising out of credit card operations.

16Jurisdiction of Banking Ombudsmandeficiency in banking including internet banking or other services(a) non-payment or inordinate delay in the payment or collection of cheques, drafts, bills etc.;(b) non-acceptance, without sufficient cause, of small denomination notes tendered for any purpose, and for charging of commission in respect thereof;(c) non-acceptance, without sufficient cause, of coins tendered and for charging of commission in respect thereof;(d) non-payment or delay in payment of inward remittances;(e) failure to issue or delay in issue of drafts, pay orders or bankers cheques;(f) non-adherence to prescribed working hours ;(g) failure to provide or delay in providing a banking facility (other than loans and advances) promised in writing by a bank or its direct selling agents;(h) delays, non-credit of proceeds to parties' accounts, non-payment of deposit or no observance of the Reserve Bank directives,(i) complaints from Non-Resident Indians having accounts in India in relation to their remittances from abroad, deposits and other bank related matters;(j) refusal to open deposit accounts without any valid reason for refusal;(k) levying of charges without adequate prior notice to the customer;(l) non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank on ATM/Debit card operations or credit card operations;(m) non-disbursement or delay in disbursement of pension (to the extent the grievance can be attributed to the action on the part of thebank concerned, but not with regard to its employees);(n) refusal to accept or delay in accepting payment towards taxes, as required by Reserve Bank/Government;(o) refusal to issue or delay in issuing, or failure to service or delay in servicing or redemption of Government securities;(p) forced closure of deposit accounts without due notice or without sufficient reason;(q) refusal to close or delay in closing the accounts;(r) non-adherence to the fair practices code as adopted by the bank;(s)non-adherence to the provisions of the Code of Bank'sCommitments to Customers issued by Banking Codes and Standards Board of India and as adopted by the bank ;(t) non-observance of Reserve Bank guidelines on engagement of recovery agents by banks; and(u) any other matter relating to the violation of the directives issued by the Reserve Bank in relation to banking or other services.deficiency in banking service in respect of loans and advances:(a) non-observance of Reserve Bank Directives on interest rates;(b) delays in sanction, disbursement or non-observance of prescribed time schedule for disposal of loan applications;(c) non-acceptance of application for loans without furnishing valid reasons to the applicant; and(d) non-adherence to the provisions of the fair practices code for lenders as adopted by the bank or Code of Banks Commitment to Customers, as the case may be;(e) non-observance of Reserve Bank guidelines on engagement of recovery agents by banks; and(f) non-observance of any other direction or instruction of the Reserve Bank as may be specified by the Reserve Bank for this purpose from time to time.

Limitations on power of Banking Ombudsman:cannot pass an award directing payment of an amount greater than actual loss suffered by the complainant as a direct consequence of the act of omission or commission of the bank or ten lakh rupees whichever is lower.In the case of complaints, arising out of credit card operations, compensation not exceeding Rs. one lakh to the complainant, taking into account the loss of complainants time, expenses incurred by the complainant.

Appeal before the Appellate authority within 30 days

power to dismiss the appeal, or to allow the appeal and set aside the award, or to remand the matter to Banking Ombudsman for fresh disposal in accordance with the directions as it may deem necessary or proper, or modify the award and give effect to modified award or pass any other order as it may deem fit.Questions?