Mar
5
Prepayment penalties imposed on banks when people try to clear off their loans early – no resolution
March 5, 2010 | Leave a Comment
If you have taken a home loan, then you wonder at the huge amount of loan outstanding, as well as the number of EMI’s that have to be made (these EMI’s could be large sums of money that would go over many years, possibly over a decade or more); but it is worth it if you want to own that first or second home; in fact if you did not have a home, and the loan amount allowed you to buy your own home rather than live in rented accommodation, you would certainly consider the home loan to have been worth it.
But, as time moves on, you have to consider your finances. You find that the home loan you took was at a rate of interest that is much higher than the current rate of income in the market, or even the bank from which you took the loan once is now offering a rate of interest that is much lower than the loan you are servicing. And you would like to change your loan so that you can avail of the lower rate of interest – and then you run into the instrument that banks apply to prevent you from doing that. This is called the prepayment penalty, and it means that the bank will charge you a certain penalty if you want to make a prepayment to your loan (this could be prepayment above a certain amount, or if you try to pay the whole amount back).
Recently, the Competition Commission of India had declared that it was thinking of imposing a penalty on banks that impose such prepayment penalties, since the penalty acts as a deterrent to people who want to change their banks; however, recently the Reserve Bank Deputy Governor, Usha Thorat has weighed her opinion on this matter, claiming that such a policy would force banks to charge more in terms of enhanced interest rates so as to cover their finances (link to article):
Reserve Bank Deputy Governor, Usha Thorat, said abolishing the practice of levying pre-payment penalty on loans could prompt lenders to hike interest rates to pass on their burden to customers. “There is a chance that banks may pass on this burden to customers (if the prepayment penalty is abolished),” Thorat told reporters.
Banks usually impose a penalty in the range of 2-3 per cent on those customers who choose to close their loan amount before maturity. This, bankers said, would impact their interest earnings besides increasing lending risk.
Mar
3
Police official ordered to pay compensation by Human Rights Commission for interfering in a money dispute
March 3, 2010 | Leave a Comment
In India, police officials tend to believe that they have a huge amount of power, and they are not shy from exercising this power. There have been a huge number of cases in the past where police officials have been accused of using their influence in a negative manner, and in many cases, there have been convictions also of these police officers. This includes cases where police officials take sides in a dispute because either they have been influenced by one side, or because they have a stake in one of the sides of the dispute (or as in this case, there is a relative known to them). It gets more difficult for them to justify their involvement when the cases are more in terms of civil disputes, since in such cases, it is essentially a dispute between 2 parties without any direct criminal implications.
There have been fewer cases where a state Human Rights Commission has stated that a police official should be docked a penalty for intervening in one side of a dispute, and I am not sure whether a State Human Rights Commission has the legal authority to order such penalties. However, the facts of the case do not justify the stated involvement of the police official (link to article):
A police official has landed in trouble for interfering in a money dispute in 2007. The State Human Rights Commission (SHRC) has directed Mayilvaganan, the then DSP of Srivaikundam in Tirunelveli district, to pay Rs 50,000 as compensation to Rajarathinam and his brother of Tiruchendur. The state government should first pay the compensation and then recover it from the police official, the Commission said.
Commission members A R Selvakumar and S Paramasivan, rejected the DSP’s contention and said the police had no jurisdiction to act in a dispute that was civil in nature. Further, the DSP hadn’t produced the original or copy of the complaint allegedly given by Ravi’s family. Oral testimony of Rajarathinam and his brother appeared to be natural, cogent and believable exposing the DSP’s high-handedness.
Mar
1
Consumer court fines SBI Cards in a case filed by a customer and awards damages to the customer
March 1, 2010 | Leave a Comment
There are numerous stories of consumers in India in their interactions with credit card companies. Some of the complaints that people have deal with credit card companies giving them cards without their asking for such cards, there are cases where people have been charged for services (such as insurance schemes, or others) that they have not requested for and have to fight to get removed, or when there is a transaction made on the card that the customer has not made. In many of such cases, action by consumer forums or the banking regulator have checked the practices by these agencies, but there continue to be a number of cases that make their way to consumer forums or to courts.
In another case of this kind, a complaint was made against SBI Cards, stated that the card company released a card different from the one that he had applied for, and then even many months after this when he had not yet received a card from the company, the complainant was asked to pay a fee (which is pretty absurd). And then the card company accepted that the card request was correct, but then sent him a sum of money that he had not requested. Finally, since there seemed to be no respite, a complaint was lodged in the consumer forum and then SBI Cards refused to attend the hearing. Finally, the consumer court delivered a judgment against SBI Cards (link to article):
The complainant alleged that the defendants cancelled the demand letter and informed him that his request for SBI international card was admitted when he clarified to them that he had applied for SBI card only. But again no card was sent to him. SBI Cards on July 11, 2006 sent him an account payee cheque for Rs 10,000 of SBI, Gurgaon issued in his name and directed to deposit the same in a new SBI card number.
SBI Cards did not appear in the forum despite the service of notice. The presiding officers heard the complaint ex-parte and decided in favour of the petitioner, Rajesh Mehra after going through the documentary evidence and arguments. The judges observed that the entire proceedings were initiated by the SBI Cards, hence it was liable to pay the damages.
Feb
7
Awarding compensation for an unborn baby
February 7, 2010 | Leave a Comment
In the US, there is a huge controversy about the status of unborn babies or fetuses. Abortion (both for and against it) is a big deal, with every election, every judge appointment, all such having to pass the litmus test about which side they are on. However, in India, there is not such a big deal about it.
A recent decision by the Delhi High Court has acknowledged that the death of an unborn child can result in damages being awarded, something that we don’t see too often. In a decision over a death in an accident, where the fetus died in an accident, the High Court rules that the fetus can be considered on par with a minor child, and ordered the insurance company to pay compensation (not however, comparing the fetus with a major child). Read more about this judgment in this article:
HC allowed an appeal filed by one Prakash seeking compensation for his unborn child as his plea was ignored by the Motor Accident Claim Tribunal (MACT). The court, however, made it clear that the dead foetus cannot be compared with a grown-up child, because by then a child’s presence in the life of his or her parents has created enough memories for them to feel greater pain at the loss of their child. This pain will be lesser were an unborn child to die as in that case there will be no memories to cherish.
“This court holds that an unborn child — aged five months onwards in mother’s womb till its birth — is treated as equal to a child… the foetus is another life in a woman and loss of foetus is actually loss of child in the offing,” HC reasoned, while allowing the appeal and the compensation of Rs 2.5 lakh along with an interest rate of 7.5 per annum to Prakash.
Jan
27
Learn more about Fixed Maturity Plans – Article on Economic Times
January 27, 2010 | Leave a Comment
Fixed Maturity Plans were all the hot thing a couple of years back, especially in the year 2007. They were advertised as plans that offered ‘guaranteed’ returns, even though the regulator did not allow fund companies to announce guaranteed returns, only advertise the returns as indicated returns. FMP’s are actually similar to fixed deposits in banks, where the money is invested in fixed-income securities, the equivalent of almost investing in debt funds. The maturities offered were varied, going from one months to three years. The FMP’s were closed ended in nature, and would not ask for fresh funds after the opening. The idea was that they exposed the customer to a much lower level of risk than equities. Interest payments would ensure that the customer got money at regular intervals.
However, in the crash that started in January 2008, FMP’s also suffered huge pressures, and performance really got clobbered, with people no longer feeling the charm that they used to feel earlier. Further, the huge pressure of redemptions meant that some Mutual Funds actually made it more difficult for investors to redeem their money. However, FMP’s are now making a comeback, given that many MF’s have announced a range of new schemes. The indicated returns are lower than were being offered earlier, and with more stringent controls put in by SEBI to ensure that funds did not invest in highly risky debt schemes. However, there is still not too much liquidity in FMP’s, with very low trading on the exchange.
Read more about Fixed Maturity Plans in this article (link)
But investors have to be careful about their investments in such products. After some investors burned their fingers in some FMP offerings in 2008, the product was not as safe as it seemed. “Poor credit quality of papers and illiquidity of instruments were chief reasons behind the problems faced by FMP investors,” says Devendra Nevgi, founder of Delta Global Partners, a Mumbai-based investment advisory firm. As regulators have banned mutual funds from giving out indicative yields and portfolios that induced the investors in the past, it is difficult to judge the offerings in the market. “A fund manager may end up chasing higher yield at the cost of the quality of paper. This is a big risk an FMP investor faces,” says Nandkumar Surti, CIO of JP Morgan AMC.
So if you are sure you do not require the money for say, 12-15 months, you can consider an FMP. Given the abundant liquidity in the market, this may not be the best time to invest. “Short-term rates up to one year are expected to go up by 100 basis points. In February and March, investors may come across better opportunities, given the traditional withdrawal of liquidity owing to year end,” opines Mr Nevgi.
Dec
31
Family members of victims of medical negligence get compensation of Rs. 5 lakh
December 31, 2009 | 1 Comment
When people go to hospitals for treatment, they suffer from 2 major problems:
- They do not know what exactly the problem they have, and have to depend on the doctor for explaining to them what the problem is
- When undergoing surgery or other treatment, they are leaving their lives in the hands of the doctor and have no way to figure out whether things have gone right or not. It could be that that the doctor is very busy, or something may go wrong in the setup in the operation theatre, or the anesthetic used was not administered properly; in all such cases, they have to depend on the doctor and his team.
In the past, it used to be that in most of the cases, everything went fine, but in some of the cases where the result was not so good, the treatment was faulty in a smaller percentage of such cases (in some cases, the operation not turning out successful was something that could not be avoided, but in other cases, there were certain specific avoidable reasons that led to the operation not being successful). The patient and relatives had no way of figuring out whether something went right or not, or if they were being told the truth.
Nowadays, things are becoming easier for patients – they can get second opinions from other doctors about the advisability of medical treatments, and are also able to ensure that they can ask for compensation in cases where they feel that they have been wronged; consider this case (link to article):
The Delhi Consumer Commission has upheld a lower forum order, directing a city-based hospital and its doctor to pay Rs five lakh compensation to the family of a victim of medical negligence. The commission noted that the neck movement and blood pressure of the patient was found to be normal before the operation but developed complications soon after the surgery.
The appellants contended that the family members were told about the risk associated with the operation and there were no negligence on their part as she died due to cardiac arrest. The commission said that from the medical tests of the deceased before the operation, it was clear that the patient was not suffering from any heart-related disease.
Dec
15
Insurer to pay after order by High Court
December 15, 2009 | Leave a Comment
One of the biggest issues in cases involving insurers is when the insurance company refuses to pay up and the person is depending on the money from insurance; typically the insurance company will either plead that the person was responsible for the situation in which there was need for insurance, or that there was something malafide that happened, and the insurance company is not liable. In most cases, such matters go onto either consumer courts, or higher courts which then decide – and in a number of cases, such courts criticize the insurance company and find for the citizens. Consider this case in which a girl got crippled by an accident and it is taking the strict admonishment of a High Court to get the insurance company to pay up (link to article):
The high court bench of Justices Sharad Bobde and S J Kathawala on Monday dismissed as withdrawn an appeal filed by the company challenging an order of the Motor Accident Claims Tribunal. And, in response to an appeal filed by accident victim, Shweta Mehta, seeking an enhanced compensation from New India Assurance, the HC castigated the company for its “miserly” attitude and directed it to pay her the Rs 21.23 lakh that the tribunal had ordered in 2007 along with interest. “Pay the difference in amount already paid out of Rs 21.23 lakh at the rate of 12% from date of filing the petition till December 2002 and then at 7.5% between 2003 to 2006 and then again at the rate of 10% between January 2007 till the final amount is paid up.”
We take insurance in order that the money can help us in bad times, or at the loss of the money earner of the household; however, when the insurance company refuses to help us, it can be really problematic. In the case of accidents, it is the responsibility of the insurance company that has insured the vehicle to pay out compensation to the accident victims.
Nov
27
Airline charges extra for child, told to compensate
November 27, 2009 | Leave a Comment
Quite a few times, consumers get stuck in the dispute around being promised something when they are placing the order; and when they go for delivery, at that time, they do not get what was promised. This can cause them great inconvenience, and also expense; and it is at such times that consumer forums help hapless consumers get justice. For example, in this case, this family was promised that their child will be given an infant ticket even for a journey where the child would no longer be an infant as per age, but since the round trip was started earlier, such a concession would be available. However, at the time of the trip, the airline refused to allow such a concession causing additional expense and lots of inconvenience (link to article):
District consumer forum penalized Air Canada on Wednesday for deficiency in service and causing mental harassment to Sector-43 resident Inderpreet Kaur. The airline was directed to refund Canadian dollars 632.98 to the complainant and pay Rs 5,000 as damages along with Rs 2,000 as cost of litigation as it overcharged for the ticket of her minor son Jaideep.
Their two children were to accompany them. She stated that Jaideep was less than two years old at the time and they paid the fair for ‘infant’ category in his case. As Jaideep’s birthday fell on June 17, he was to become ineligible for the low-price ticket during the trip. Kaur said the travel agency was told about this and the staff there informed her that Jaideep would be allowed to travel on the ticket even after he attained the age of two as the round trip was to begin when he was an infant.
Nov
23
Companies filing suit over other companies advertising
November 23, 2009 | Leave a Comment
Companies advertise the earth and make outstanding claims in these ads, some of which do end up converting people. So claims that a food item will make you friends in school, or that a shampoo will end up killing all your dandruff quickly, or that a brand of biscuit or milk additive will make your child grow taller and smarter are more often not true, to be taken with a pinch of salt. Even in some case, when there is a probability of the claim being true in some cases, the company will make you understand that it is true in all cases.
Consumers have challenged such claims in the past, but now the poor state of the economy has caused companies to join this fight, and challenge the claims of other companies in this regard. Such actions are of course even more beneficial to customers, since such actions help them from getting hoodwinked by the false claims of companies (link to article):
Companies that were once content to fight in grocery-store aisles and on television commercials are now choosing a different route – filing lawsuits and other formal grievances challenging their competitors’ claims. Longtime foes like Pantene and Dove, Science Diet and Iams, AT&T and Verizon Wireless, and Campbell Soup and Progresso have all wrestled over advertisements recently.
Dueling advertisers, however, argue that these claims can mislead consumers and cause a pronounced drop in sales. Because advertisers are required by law to have a reasonable factual basis for their commercials, their competitors are essentially demanding that they show their hand. The goal is usually not money but market share. Companies file complaints to get competitors’ ads withdrawn or amended. The increase in these actions may be a reflection of the dismal economy: during recessions, when overall spending lags, marketers must fight harder for customers.
Nov
21
Number portability to cost only Rs. 19
November 21, 2009 | Leave a Comment
For some time now, the TRAI has announced that India will have a system that allows number portability, just that the date by which the system has to come into operation keeps on getting delayed. Number portability is a process by which a consumer can get to keep their number while changing their service provider; something that allows a lot more freedom to consumers. After all, one of the biggest problems currently with changing your service provider is that you have to take a new number, one that you need to send to all your friends, family and colleagues, and the longer you have had your current number, the more difficult it can be. Number portability means that if you find plans from a different service provider to be more useful, or if the service level of your current provider is not satisfactory, you can change and yet get to keep your number (I remember when I had to change my number since the previous provider did not have a good tower network nearby and call dropping was rampant, and the number changing was a nuisance).
After it was announced that number portability would need to be implemented, many service providers were talking about the cost of maintaining the infrastructure for number portability, how it would need to be passed onto their customers, and many were wondering whether, with this cost, number portability would be useful ? However, the Telecom Regulatory Authority of India (Trai) has scotched all these reports by announcing that the cost of portability should not be more than Rs. 19, as well as the implementation would need to be done in 4 days (link to article):
The country is set to introduce mobile number portability (MNP) on December 31. MNP allows the subscribers to retain their existing mobile telephone number even as they move from one access provider to another. This move is irrespective of the mobile technology or from one cellular mobile technology to another of the same access provider, in a licensed service area. In other words, the consumer can switch from CDMA to GSM.
The move is expected to increase competition among operators and act as a catalyst to improve their quality of service. Operators are free to levy any amount less than or equal to Rs 19, the regulator has said in a statement.
In the beginning, there was opposition to the concept of number portability since established telecom operators felt that the newer operators, in order to gain volumes, would launch price wars and number portability would make it easier for consumers to shift. However, with TRAI insisting on number portability, it is now set to be introduced at the end of this year.
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