Standard Chartered Bank Held Liable For Exceeding Credit Card Expenditure Limit Without Customer's Prior Consent

Brief Facts:

Mr. Om Khorwal and Mrs. Sumitra Khorwal (“Complainants”) participated in a scheme called "just swipe and drive out in a Tata Nano," advertised by Tata Motors. The scheme purportedly allowed buyers of Tata Nano to convert the entire credit card amount into interest-free instalments over 12 months. However, upon purchasing a Tata Nano with a Standard Chartered (“Bank”) credit card under the scheme, the Complainants received a statement in May, stating that there were 19 EMIs with a retail interest of 3.10% per month. As per the Complainants, this was contrary to the advertised promise of interest-free instalments. Further, when the Complainants purchased a Tata Nano for Rs. 1,50,000/-, the authorized dealer of TATA Motors, Concord Motors (“Dealer”), issued a receipt explicitly stating "no interest shall be paid" for the amount. The Complainants made several communications with Tata Motors, the dealer and the bank for the violation of the promise but didn't receive a satisfactory response from either of them.

Feeling aggrieved, the Complainants approached the District Consumer Disputes Redressal Commission-II, New Delhi (“District Commission”) and filed a consumer complaint against them for failing to fulfil the promise. The Complainants argued that the bank without permission converted the credit amount into interest-free installments across various credit cards held by them. They argued that they applied for conversion of the credit amount of one credit card held by them.

In response, the bank argued that the Complainants exceeded the credit limit. It maintained that EMI conversion was discretionary, and since the Complainants surpassed the credit limit, the transaction of the purchase of the vehicle wasn't converted into interest-free instalments. It asserted that it communicated all relevant details through monthly statements and denied any deficiency in service on its part.

The dealer claimed there was no cause of action and stated that the Complainants knowingly entered a transaction which was above the credit limit assigned to them. It argued that transactions under the scheme were monitored by banks, and they cannot be held liable for bank's actions. Tata Motors argued a lack of locus standi and prayed for the dismissal of the complaint.

Observations by the Commission:

The District Commission noted that the Complainants deposited Rs. 6,000/- towards the conversion of the credit card amount into interest fee instalments. Further, the District Commission noted that despite the Complainants' payment and the bank's acknowledgement of the same, the transaction was not converted into EMIs repayable at zero per cent per month.

The District Commission noted that once the bank accepted Rs. 6,000/- for conversion, it should not have used the funds towards other credit cards held by the Complainants. The District Commission held that the bank, after leading the Complainants to pay Rs. 6,000/- for the outstanding amount, autonomously used those funds towards other Credit Cards.

Furthermore, the District Commission emphasized the dual responsibility in credit card transactions, where the Complainants must spend within their available balance, but the bank also must communicate with them when they attempt to exceed their credit card limit and advise them on expenditures beyond the limit.

In light of these findings, the District Commission held the bank liable for deficiency in service. Consequently, the District Commission directed the bank to pay a compensation of Rs. 25,000/- to the Complainants within three months from the date of the order.