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dineshchandra   15 March 2015

Foreclosure penalty in violation of NHB directive.

I foreclosed loan from a Housing Finance Company (HFC) on 23/10/10 from own sources. The loan was availed in 'individual' capacity. The HFC levied 2% penalty for foreclosure. Then I got legal advice that in absence of RBI directive prohibiting foreclosure penalty, I had no choice but to pay this penalty as per loan agreement.

Recently I learnt that said HFC actually comes under direct purview of National Housing Bank (not RBI); and NHB circular dated 18/10/10 prohibited levy of said penalty 'with immediate effect' for foreclosure by 'individual borrowers' financed from own sources. On approaching said HFC, it refused to refund this sum, stating "penalty was applicable on date of foreclosure (i.e. 23/10/10)". In parallel, I got legal advice that I have already missed the bus, because of not approaching consumer court within 2 years from cause of action (i.e. by 22/10/12).

Do I have remedy available, considering penalty was levied in violation of NHB directive?



 12 Replies

kaya (manager)     15 March 2015

Diwan housing finance comes under registered co with national housing bank act.please refer .notification issued by national housing bank to its all registered finanance co by speed post referring Letter no NHB (ND)/DRS/FolNo 36/2010 DTD Oct 18th 2010.not to charge prepayment or penalty for pre closure.If they over look they attract penal consequences under the nation housing bank act 1987. This is wholly owned by RBI. Infirm diwan finance they will refund send road before going to consumer or higher authority.
1 Like

kaya (manager)     15 March 2015

Diwan housing finance comes under registered co with national housing bank act.please refer .notification issued by national housing bank to its all registered finanance co by speed post referring Letter no NHB (ND)/DRS/FolNo 36/2010 DTD Oct 18th 2010.not to charge prepayment or penalty for pre closure.If they over look they attract penal consequences under the nation housing bank act 1987. This is wholly owned by RBI. Infirm diwan finance they will refund send road before going to consumer or higher authority.

kaya (manager)     15 March 2015

Diwan housing finance comes under registered co with national housing bank act.please refer .notification issued by national housing bank to its all registered finanance co by speed post referring Letter no NHB (ND)/DRS/FolNo 36/2010 DTD Oct 18th 2010.not to charge prepayment or penalty for pre closure.If they over look they attract penal consequences under the nation housing bank act 1987. This is wholly owned by RBI. Infirm diwan finance they will refund send road before going to consumer or higher authority.

dineshchandra   16 March 2015

Dear Kaya,

Thanks for your advice. I had already sent HFC the circular referred by you {NHB (ND)/DRS/FolNo 36/2010 dated Oct 18th 2010} by registered post. Two key points conveyed by them through written response are:

1. The accounts for the month Oct'10 are closed, and can no more be revisited.

2. As per HFC's policy, foreclosure penalty was applicable on 23/10/10, too.


It also verbally declined to spell out 'effective what date, it stopped levy of foreclosure penalty'; by stating that "I shall only be bothered about whether penalty was applicable (as per said HFC's policy) on the date I closed loan (23/10/10)". Its blatant disregard for NHB circular (which does not leave anything to discretion of Housing Finance Companies) is baffling. It has not responded to subsequent legal notice in this regard, sent last fortnight. Does it make sense to approach Consumer Court, or I shall take the injustice in stride, and move on?

Thanks.

Skeptical optimist (N A)     16 March 2015

Why don't you approach the NHB to initiate penal action as per NHB Act; for functioning as rogue HFC? This will help create pressure on given HFC.

Although at NCDRC portal, you will find more judgements against NBFCs under purview of NHB, in comparison to entities under RBI purview. And this means there exists scope for NHB to improve upon the way it regulates...


Attached File : 737459855 nhb circular (oct 18, 2010).pdf downloaded: 87 times
1 Like

dineshchandra   17 March 2015

Incidently, in judgement for case no. CC/637/2012, District Consumer Disputes Redressal Forum-II, U.T. Chandigarh pronounced in paragraph 8: "Unless specifically provided in the Agreement, the complainant would naturally presume that the loan would be subject to RBI Guidelines, as is the case for all financial transactions by all financial organizations". Please refer below link.


https://164.100.72.12/ncdrcrep/judgement/663614091013004203Raj%20Kumar%20DHFL.htm

Skeptical optimist (N A)     18 March 2015

I guess this HFC might have followed same strategy of money extortion from other borrowers who fore-closed loan in same time-frame, too. If couple of other HFCs were in same boat; then this appears a scam running into Crores.

Skeptical optimist (N A)     18 March 2015

You have unearthed valuable citation (paragraph 8, case no. CC/637/2012, District Consumer Disputes Redressal Forum-II, U.T. Chandigarh).

T. Kalaiselvan, Advocate (Advocate)     18 March 2015

Under the circumstances to create a liability and to bring the matter within the limitation, you may move an application to NHB narrating the irregularities and gross violation of its order by Dewan Housing finance and their refusal to refund the excess deduction in the name of penalty for foreclosure, seek their intervention for relief and remedy with a copy to DHFL, on the basis of their reply whether favoring you or not, you may approach the consumer forum within your jurisdiction. for actual relief which will be well within the limitation then. .

1 Like

dineshchandra   18 March 2015

Dear Sir,

This is very practical and doable advice; considering 'limitation' being key hurdle here.

I had posted the query at 'expert' forum too, for wider response. Regret spamming caused by me.

Thanks a lot.


Attached File : 91265504 circular.jpg downloaded: 51 times

Adv k . mahesh (advocate)     24 March 2015

the circular point no 2 last sentence says that from immediate effect and how come they refuse to return your money 

you can initiate a complaint to NHB and also the process can be done directly visiting their office at your place and discuss with them personally which solves times also 

because already you had lost the precious time so any letter from NHB or any direction from then it will be an added advantage to go to consumer court if they refuse 

1 Like

gopal   17 February 2016

I completely differ. The NHB guidelines are meaningless if there is provision for the same in the agreement signed by you. The NHB in their website on the subject "Cell for redressal of grievances of depositors/borrowers of HFCs" have categorically stated the following

4. As regards loan related complaints, the Complaint Redressal Cell plays a facilitative role by taking up the complaints with the concerned HFC. It is for the reason that rates of interest including any increase or reduction therein, pre-payment or loan closure charges, loan disbursals, recovery on defaults in payments and other covenants in the loan agreement are not being regulated by the National Housing Bank. A loan transaction is essentially a contract between the lender and the borrower and both the parties are governed by the same. The borrowers are, therefore, advised to go through the terms and conditions of the loan and get all the terms clarified before signing the loan agreement.

Link :https://www.nhb.org.in/Regulation/Complaint_Cell_against_HFCs.php

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