What is the Supreme Court Judgement on Credit Card Defaulters?

Credit card defaulters are those credit card users who cannot pay their interest and related charges on time. These individuals are liable to pay fines, penalties, and more, based on the rulings from the court. Banks used harsh recovery tactics from cardholders to protect the interests of cardholders.
RBI and the Supreme Court have laid out credit card non-payment legal action in India. Further maximum punishment for credit card defaulters has been stated to be imprisonment in severe default cases of credit cards. It could take up to 2 years per the Negotiable Instrument Act, of 1881 (Section 138) to balance car defaulters and financial institutions.    

What Happens if a Credit Card Bill is Not Paid?

If your card defaults, then there are credit card non-payment legal actions in India that you may need to face actions such as;

• High interest rates for late payment

• Reminders, emails and calls

• Late payment fees

• Blocking further usage of credit card

• Sue against cardholder for bad debt recovery

• Blocking customer funds from savings accounts

• Increased interest rates

• Affecting CIBIL score in a negative manner

• Filing legal complaints against you in court after 180 days (As per Section 138 (Negotiable Instruments Act, 1881)

Supreme Court Judgement on Credit Card Defaulters

The Supreme Court proposed judgments based on credit card cases, which are listed below.

ICICI Bank vs. Shanti Devi Sharma (2008)

• Banks are liable for the act of their agents for ethical practices

• Consumer rights are established to report harassment and coercive tactics by the recovery agent

General Manager, (CIBIL) Vs. State of Maharashtra (2010)     

• It is the liability of the Credit Bureau to maintain data accuracy

• Consumers are given the right to raise disputes if they find discrepancies in their reports.

State Bank of India (SBI) Vs. Ranjan Kumar Mitra (2015)

• Co-applicants are stated to be equally liable to pay the credit card debts.

• Awareness focus is made by the Supreme Court on understanding a co-applicant's liability before applying.

RBI Guidelines for Credit Card Recovery Agents

RBI has established credit card recovery rules in India, and banks and financial institutions must operate and act with defaulters based on these.

Recruiting Recovery Agents

Banks are required to have background checks for recovery agents while it is the role of the bank to disclose the identity of the recovery agent. The recovery agent needs training and a certificate related to the recovery process.  

Recovery Process Monitoring

As part of the monitoring agents need to follow all laws and ethics guided by the Supreme Court, and RBI. Communications between the agent and the card defaulter must be recorded.

Legal Compliance

It is the responsibility of the Bank to ensure legal recovery and that all guidelines and laws are followed during the recovery process.      

Steps that Credit Card Defaulters Can Take

If you are a credit card defaulter, then you can have the following processes to have a smooth move ahead.

Step 1: The first stage is to communicate with your bank and explain financial issues and the repayment plan to them, and ask for a lenient repayment method.

Step 2: Seeking financial advice makes it easy for you to repay while ensuring enough cash flow for personal expenses. They ensure proper management of your funds.   

Step 3: As per Supreme Court you must be clear about your rights and responsibilities as a credit card defaulter.  

Step 4: It is the responsibility of the credit card holder or defaulter to regularly check their CIBIL score and credit reports to know of errors or wrong data updates and raise the same to the authorities for correction.

The Supreme Court has made numerous judgments on credit card defaulters and it is in the best interest of the credit card holders. The court has mandated banks and financial institutions to use a friendly approach with defaulters, and not to hire recovery agents who force cardholders. Banks are affected by decisions to invest more in agent certifications and training, disclose identity and use smooth ways to recover bad debts.

However, it is important to know your rights and responsibilities as a cardholder and pay the amount on time. If you are unable to do so, you must communicate the same to the bank at the earliest.