Foreclosure charges not mentioned in agreement

State bank of Indore: www.indorebank.org/service_charges/ser_rbi.doc

This shows clear cut difference between pre payment and Foreclosure term by the bank.

Foreclosure should stand for ending before term in agreement as written by you in your post.

RBI has abolished Foreclosure/prepayment charges on home loans w.e.f. 5^th June, 2012.

RBI has used only one term.

You may obtain the brochure from the bank specifying separate prepayment {e.g. paying EMI before time or making payment more than EMI} and foreclosures charges separately, and build some ground for agitating to the bank.

A smart lawyer handling consumer cases may build complaint based on facts provided by you and may structure your representations to the bank. You may consult to check if there are merits in your contentions.

Banks like Axis bank probably waive of One year EMI for paying on time.

Surprisingly, the National Housing Bank (NHB), which controls over 54 housing finance companies in the country has stolen a march over the RBI by announcing waiver of pre-payment penalty as early as on 19 October 2011 and it has been more generous enough to extend this benefit to all the borrowers availing home loans on both fixed and floating rate basis.

Apparently you have not filled any new loan application for Rs. 10 Lacs and you have not rejected the sanction letter of Rs.12 lacs.

It is felt that bank should have issued sanction letter for Rs.10 Lacs as well. Ideally all terms and conditions expressed by any document should form a part of the loan agreement and should have been expressed in loan agreement.

Did you protest on record for foreclosure charges?

BCSBI:

10. What are the fees and charges applicable to the loan?

Generally, banks levy fees/ charges for:

·         processing loan application

·         documentation

·         late payment

·         changing the loan tenure

·         switching to a different loan package during the tenure

·         prepaying a portion or full loan

·         restructuring the loan

·         changing from fixed to floating interest rate loan and vice versa

Some of the other charges levied by banks are:

·         legal fee

·         technical inspection fee

·         recurring annual service fee

·         document retrieval charges, etc.

11. Do I have access to loan documents? If so, what are they?

Yes. You can have access to loan documents. Following are some important documents provided by banks:

·         letter of offer

·         copy of filled in loan application

·         copy of loan agreement

·         terms and conditions governing the housing loan

·         other documents such as schedule of fees and charges

Banks are required to give authenticated copies of documents executed by you free of charge. (cf. para 8.11.1 of Code of bank’s Commitment to Customers)

RBI:

3.         Principles of reasonableness in fixing, changing                                          46

                 and notifying service charges

Approach a competent and experienced consumer cases lawyer and roceed under expert advice.

Thanks Kumar. I had closed the loan a year back before RBI got the rule. Also I had protest on record that the charges are not applicable.

Approach a competent and experienced consumer cases lawyer, show all documents, protest/complaints/representations, give inputs in person, and check with your lawyer if there are merits in your contentions. If there are merits you may proceed under expert advice of your lawyer.

A smart lawyer handling consumer cases may build complaint based on facts provided by you and may structure your representations to the bank, before you issue notice and file complaint.

Dear Mr.Ramchander,

As Mr. Kumar Daob rightly advised, you have a cause of action in consumer forum in this matter.

I would like to add some clarification in this regard. There is nothing like 'foreclosure charge'. The word 'foreclosure' relates the chapter on Mortgages in Transfer of Property Act. So it is misnomer to call pre-closure charge as forclosure charge. It is in fact bank's right to sue the mortgagor not to allow redemption of mortgage. Hence it is to be understood as 'pre-closure charge'  for closing the loan account by you before due date of its termination in normal course and not 'foreclosure charge' as wrongly called very often. When the bank has not mentioned in the loan agreement anything about pre-closure charge it is not in order to recover the same from you.

Thanks Mr Ramachary. That was enlightening.