Usurious Interest Rates on Credit Cards

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National Consumer Forum on 07.07.2008, in “Awaz” vs. American Express Bank Ltd. held that the rapid expansion of banking facilities and of access to credit facilities and on the other hand, it has led, as a result of the aggressive marketing practices adopted, especially, by the banks, which induce the unsuspecting customers to take loans, in one form or the other, for purchasing consumer goods and durables even when they are not quite needed. This makes these consumers debtors forever. Such indebtedness results in constant tension to repay the loans and the “EMIs” – at times well beyond the borrowers’ / debtors’ repaying capacity. The ill effects of unaffordable EMIs are now being highlighted in the print and other media almost daily. In the case of motor vehicle loans, for example, the debtor / borrower is under constant tension that if he fails to pay one or two instalments, he would receive threats from the so-called “recovery agents” of the banks. The RBI has permitted the banks to appoint “recovery agents” on contract, without perhaps fully appreciating the implications that these “recovery agents” are usually musclemen, employing whom increases nothing but goondaism—(2)(a) Whether banks can charge the credit card users interest at rates ranging from 36% to 49% per annum if there is any delay or default in payment within the time specified?—-(b) Whether interest at the above-stated rates amounts to charging usurious rates of interest?—HELD THAT—prima facie, charging of interest at rates ranging from 36% to 49% p.a. is exorbitant and amounts to exploitation of the borrowers / debtors and is usurious.