In a landmark judgment that promises to reshape banking customer rights, the Delhi High Court has come down heavily on Citibank for harassing a city lawyer over unauthorized credit card transactions while directing the Reserve Bank of India to overhaul its complaint redressal mechanism.
Court Takes Strong Stand Against Banking Harassment
The court recently imposed a substantial cost of Rs 1 lakh on Citibank for the mental harassment and trauma inflicted upon advocate Sarwar Raza, who was even threatened by recovery agents when he refused to pay dues arising from fraudulent transactions on his card. Justice Prathiba M Singh delivered the verdict that could transform how banks treat customer complaints across India.
The case originated in January 2022 when Raza was issued a credit card by Citibank, followed by another card in April without his consent. When the lawyer raised concerns, the bank allegedly assured him that the unactivated card would remain dormant. However, the bank subsequently sent him a bill exceeding Rs 75,000, which included unauthorized transactions that Raza never authorized or conducted.
The Long Battle for Justice
Despite filing complaints with both the bank and police, Raza found himself trapped in a bureaucratic nightmare. The bank initially softened its stance but continued billing the disputed amount with accumulating late fees and additional charges. Forced to escalate the matter, Raza approached the RBI ombudsman, only to face rejection on technical grounds.
The court noted with concern that the RBI ombudsman summarily rejected Raza's complaint first because he was a lawyer, and subsequently because one field in the complaint form was left empty. This mechanized approach to complaint rejection drew sharp criticism from the bench.
"The rejection of complaints... due to such technical reasons shows that the functioning of the ombudsman of RBI is not more consumer-friendly," Justice Singh observed, highlighting the need for a more humane approach to customer grievance resolution.
Sweeping Reforms Ordered for Banking Sector
The court issued several crucial directions that could significantly strengthen consumer protection in the banking sector. Most notably, the bench prohibited banks from levying any charges or fees on disputed transactions while customer complaints remain unresolved.
"The charging of late payment of fee, interest, etc., in such cases when customers have lodged complaints and that too without resolving the same shall not be permissible," the court explicitly stated, putting an end to the practice of compounding charges on disputed amounts.
The judgment also mandates that if a complaint is rejected, it must undergo second-level human supervision by trained legal personnel such as retired judicial officers or lawyers with at least ten years of experience. This measure aims to prevent complaints from being rejected due to minor errors or technicalities.
Transparency and Accountability Measures
In a move toward greater transparency, the High Court directed RBI to ensure that all banks and financial institutions clearly display on their websites a flowchart showing the hierarchy of officers handling consumer complaints. This will enable customers to understand the escalation process and know exactly whom to approach at each level.
The court also ordered RBI to file an affidavit detailing steps taken to ensure complaints are not rejected through a mechanized process, emphasizing the need for a more compassionate and effective grievance redressal system.
Recognizing the "long and arduous journey that a credit card holder has to undergo when any fraudulent transaction takes place," the judgment stressed that banks and the regulator must "ensure that innocent credit card holders are not made to undergo harassment and frustration by incessant emails, messages and demands."
Following judicial scrutiny, Citibank separately tendered an unconditional apology and reversed the charges levied on Raza. However, the court's strong stance and the imposed fine send a clear message to the entire banking industry about the consequences of harassing customers over disputed transactions.
