I recently came across an interesting practices by banks in which the banks cunningly liverage Banker's General lien on securities of gullible & illeterate farmers.
These farmers usually get crop loans available either thru the government programme or thru sugar factories. The loan is given after deducting the insurance whose terms and conditions are never disclosed to the farmers. They simply deduct the insurance premium and give the balance to the farmers. The farmers sometime may not be able to pay the loan either due to loss of crop (rain, fire etc) or lower return of grains/produce. Once in a while the government comes up with a waiver programme to waive off such outstanding loans.. Such loand are generally unsecured in nature as it is only against the crop (produce of that season)
If in the meantime, the farmers approach the banks with secured loan against properties such as gold ornaments, the bank happily gives them a loan after securing such gold ornaments and never tells the farmers that the banks will create a liean against such ornaments for securing other outstanding loans with them. The illiterate farmer goes ahead and signs the pledge documents without understanding all those terms and conditions that is one sided and is against him. Few months later he goes to the bank to payup that gold loan and ask for return of the ornaments and the bank tells them that he must pay his crop loan to get the ornaments returned.. The farmer gets a shock of his life and the entire family is put to undue hardships. Sometime these farmers use ornaments of friends and family and get trapped into this issue..
Now apparently the bak has the legal right to extend a general lien on customer's dues to them on other loans (u/s 171 of Contrat Act) but the issue is that this a trap from the farmers point of view because the farmer was never told that the bank can and will extend a lien on his gold ornaments if he has other loans due to the bank. Had he been told then he probably would not have given his/friends ornaments as security or may he would have negotitated it such that it excludes the general lien right of the bank... But having not articulated the hidden right of the bank to etend a general lien, the farmers are getting trapped and are under undue disadvantage.
The above practice is something that almost all banks does as they use a standard terms and conditions that gives undue advantage and the customers have no say in it (which is again illegal as per the contract act).
Now the question is, can we make an effective case with the Competition Comission to take such a case and inquire? Will such a case be a fitting case for the Competition Comission to deal with? If not why not?
Thanks for your considered views and any research material you may be able to proivde.