Consumer Commission Rules Against DCB Bank In Loan Classification And Foreclosure Dispute

Consumer Commission Rules Against DCB Bank In Loan Classification And Foreclosure Dispute

The District Consumer Disputes Redressal Commission-VII, South-West Delhi bench, led by President Suresh Kumar Gupta and comprising Members R.C. Yadav and Dr. Harshali Kaur, found DCB Bank responsible for imposing foreclosure fees on an individual borrower, contrary to loan terms and the Reserve Bank of India (RBI) guidelines. The Commission noted that the bank inaccurately categorised the loan as a business loan, resulting in the wrongful imposition of foreclosure charges.

The complainant approached the Karol Bagh Branch of DCB Bank seeking an extension of a home loan amounting to ₹85 lakh, secured against a property in New Delhi. The loan entailed repayment terms of 180 EMIs of ₹91,341 each, starting from December 4, 2017, and concluding on November 4, 2032. Despite the absence of specified foreclosure charges for individual borrowers in the loan terms, the complainant was unexpectedly subjected to a 4 per cent foreclosure fee upon requesting early settlement. Despite making numerous attempts to resolve the issue with the bank, the complainant received no satisfactory response. Consequently, feeling aggrieved, the complainant sought redressal by filing a consumer complaint against the bank with the District Consumer Disputes Redressal Commission-VII, South-West Delhi (District Commission).

The Bank defended its position by asserting that the loan in question was categorised as a business loan, not a home loan. According to the terms and conditions outlined in the sanction letter and in alignment with RBI circular guidelines, foreclosure charges are deemed permissible for business loans. The Bank’s argument rested on the fact that, despite being an individual borrower, the Complainant was considered part of a broader category of borrowers due to the inclusion of co-obligants and co-borrowers - namely, the Complainant, his wife, and their firm named ‘Gupta Vijay K. and Co.’. Given this commercial context, the imposition of foreclosure charges was deemed justifiable.

The District Commission determined that, as per the RBI circular, banks are barred from imposing foreclosure fees on floating #0rate term loans granted to individual borrowers. In this case, the Bank failed to adequately justify why the sanctioned loan was classified as a business loan, especially since it was not exclusively granted to the firm. The fact that both the Complainant and his wife, who were partners in the firm, received the loan suggests its individual nature rather than being solely for business purposes.

Consequently, the District Commission found the Bank liable for deficiency in service and unfair trade practices. As a result, the Bank was directed to refund ₹3,88,951.93 to the Complainant, along with annual interest at 10 per cent from the date of filing the complaint until realisation. Moreover, the Bank was instructed to pay ₹50,000 as compensation and cover litigation charges for the Complainant.