Your financial rights

Your financial rights

MONEY TODAY presents the first ever charter of your financial rights. Know what they are and how to get redressal for your investor grievances.

Been sold an insurance policy that’s all wrong for you? Bought stocks but aren’t getting dividends? Home developers playing hard-to-get? Recovery agents camping in your kitchen? Till some years ago, you’d have just had to put up with all of this—losing money, sleep and temper in the process.

By and large, the Indian investor community has been docile, letting companies get away with scams of monumental proportions.

The good news is that for some years now, investors have begun fighting back. And that has led to most regulators and financial bodies putting some sort of consumer redressal mechanism in place.

But the bad news is that even if some investors are aware of the existence of these mechanisms, most of them don’t realise that they can get help for even the least of their problems. And that’s where we come in.

For the past one year, we’ve been telling you how you can make the most of your money. Now, we tell you what you can do if something goes wrong. There’s also the small matter of your duties as a consumer, which we touch upon. As far as rights go, one of the most empowering moves has been the Right to Information or the RTI Act.

Did you know...

>> Motor insurance is transferred automatically with ownership of the vehicle?
>> Some banks have been accused of sending credit card bills late in order to charge late fees and fines?
>> Recovery agents cannot threaten you even if you have defaulted on EMI payments?
>> Trading in a listed company can be suspended if it has a backlog of unresolved investor complaints?
>>Mutual funds cannot increase the load beyond the level mentioned in the offer document?
>> Banks earn Rs 620 crore a day in interest from delays in cheque clearance?
>> You can use the RTI Act to get information that can lead to charges of corruption against income tax officials?

Consumers can insist on getting details about transactions that companies would rather bury. There’s no such thing as too much information when it comes to investments.

The role of the ombudsman in almost every financial sector, from banking and insurance to tax and telecommunications, is steadily gaining importance.

Aggrieved consumers can also approach government and quasi-government organisations. For instance, the Monopolies and Restrictive Trade Practices Commission takes up cases against real estate companies and credit card issuers and the like.

In the case of non-banking financial companies (NBFCs), depositors can approach the Company Law Board for assistance.

Finally, there’s the option of going to the civil or consumer court. (Investors are consumers of financial services and are covered under the Consumer Protection Act.) All of which is very well, but when do you approach these bodies? What exactly are your rights as an investor? Read on and find out.

Next page: Insurance - Cover or cover-up?


Cover or cover-up?

We’ve said it before: insurance is the most popular but least understood financial instrument. And because customers do not have a very firm grasp of insurance basics, insurance companies are able to get away with a lot.

In the case of general insurance, the complaints are often about companies refusing to provide third-party cover, while in life insurance, the grievances relate to delays in payment or in revival of lapsed policies.

If you have a health insurance policy, you should be aware of the recent consumer court ruling that an insurance company cannot refuse a genuine claim or refuse to renew a policy if the customer pays the renewal premium on time; the company also cannot exclude any disease covered under an existing policy at the time of renewal.

According to another ruling: “Whenever an insured takes a policy and...there is a gap of a week or a month in the renewal of the last policy, the cover has to be treated as a policy being in continuation of the earlier insurance cover.”

In the case of motor insurance, the court has ruled that on transfer of a vehicle, the benefits under the policy in force will automatically accrue to the new owner. While such judgements cannot ensure that insurers will stop harassing claimants, you can use them to bolster your defence.

Your rights

  • Cover note and receipts of payments
  • A 15-day “free look” period
  • Claim to be settled within two weeks of all relevant document submission
  • Get a surveyor to assess the loss within 72 hours in case of fire or accident policies
  • To be informed of any change in the policy benefits once it is in force

Where to seek redress

  • Grievance cell of the insurance company
  • Nodal officer of the insurance company
  • Insurance ombudsman (the complaint must be filed within a year of the insurer rejecting your claim)
  • Consumer/civil courts

CASE STUDY: Sudhir Kumar Wadhwa, DelhiSudhir Kumar Wadhwa

My fight: I had motor insurance from Oriental Insurance Company. In 1998, I sent the company a premium cheque to renew the insurance policy and got a cover note. However, because of a bank problem, there was insufficient money in my account. In the meantime, my vehicle was stolen. The claim was denied because the cheque was not honoured.

My strategy: I approached the District Forum with the help of a lawyer

My victory: The forum dismissed the case but the state commission ruled that once the company accepted the cheque and issued the cover note, the contract of insurance was complete. The company was ordered to pay Rs 1.7 lakh which was the insured amount of the car less 10% depreciated value. I was also awarded Rs 10,000 as costs.

Company response: No reply to our queries

Next page: Credit cards - Plastic troubles


Plastic troubles

Credit card issuers have received plenty of bad press— and deserve most of it. Nilima Gulati of Delhi definitely agrees.

Gulati got an ICICI Bank credit card in February 2002. In March 2003, she received a demand draft for Rs 37,500, which she had not asked for, as well as a statement showing Rs 42,250 outstanding, representing principal and interest payments on the draft. Though she returned the draft, recovery agents began harassing her. She took the case to the consumer court, which ruled in her favour.

The other favourite of credit card issuers’ dirty tricks department is to consider all bills paid on the due date (especially cheques in the drop boxes) as defaults. Then, there are bills that reach late, eating into the repayment time.

In May this year, the Monopolies and Restrictive Trade Practices Commission issued notices to HSBC and Citibank for fraudulent customer practices.

The banks were charged with violating the Reserve Bank of India’s (RBI) rules on timely dispatch of bills. Both banks allegedly delayed the delivery of bills and realisation of cheques in order to charge increased interest rates, late fees and fines.

The RBI’s revised Banking Ombudsman Scheme includes customer complaints on credit cards, as well as deficiencies in providing services by banks' sales agents.

Your rights

  • Receive the most important terms and conditions with every statement
  • A clear billing cycle with specified charges associated with payments
  • Protection against unsolicited cards and calls
  • Limited liability in case of loss of card
  • Not charged for wrong billing unless proven otherwise

Where to seek redress

  • Grievance redressal officer of the bank
  • Banking ombudsman (if the complaint is not resolved within a month)
  • Deputy Governor, Reserve Bank of India
  • Consumer/civil courts

CASE STUDY: Vibhu Bhakru, DelhiVibhu Bhakru

My fight: I had a credit card from Standard Chartered Bank, and had no dues pending. But the bank said I owed money on the card and even sent hired musclemen to threaten me. When I proved that there was nothing I had to pay, the bank issued a no-dues certificate to me. However, even after that, the bank kept sending recovery agents to my house.

My strategy: I filed a case with the State Consumer Commission in Delhi against the bank. I took up the case on my own.

My victory: The state commission ordered the bank to pay a penalty of Rs 10 lakh along with Rs 50,000 as compensation for mental agony. In addition, the court strongly condemned the bank’s practices, and said that if such complaints come to the police, they should register a case against the CEO of the bank.

However, this reference was deleted after the bank took the case to the Delhi High Court. The Rs 10 lakh penalty was also reduced to Rs 2 lakh. The entire process took me two years.

Company response: Standard Chartered Bank replied saying it had paid the Rs 2 lakh penalty, and the case is now closed.

Next page: Real estate - A thorny path home



A thorny path home

Buying a house is fraught with more than its fair share of problems. And getting hold of a dodgy developer is simply a double whammy. “Reputed” developers have been known to sell cheap projects and then offer buyers an “upgrade” for a hefty extra.

Others refuse to share the building plans with the buyer or with residents’ associations, very often because the plan has not got the necessary sanctions and approvals.

Given the amount of money that consumers pump in, the residential real estate market is pathetically unregulated. Complaints are rife, but redressal mechanisms are few. The only option for most consumers is to approach the consumer courts under the Consumer Protection Act or the civil courts in cases involving fraud and cheating.

The government has been talking of putting in place a regulator for the sector on the lines of the Insurance Regulatory and Development Authority or the Securities and Exchange Board of India, but this has not materialised as yet.

As a consumer, the best you can do is to buy wisely—get all dates and promises in writing, preserve every scrap of written matter the developer gives you, including the brochures, get a lawyer to study all legal documents, and ensure that there are no hidden charges.

Your rights

  • Be informed of structural changes in the property
  • Obtain clear title of land and property
  • Get a copy of the sanctioned building plan
  • Information about the progress of construction
  • Possession of property in time or compensation for delay

Where to seek redress

  • Complaint cell of the company
  • Organisations like CREDAI, NAREDCO and National Association of Realtors (these are membership-based organisations and only take up cases related to non-compliance of their code of ethics)
  • Registrar, Co-operative Housing Societies Federation
  • Consumer/civil courts

CASE STUDY: Veena Khanna (with husband), ChandigarhVeena Khanna with husband

My fight: I had booked a house with Ansal Properties & Industries and Ansal Buildwell for over Rs 23 lakh in July 1996. I paid the developers a little over Rs 15 lakh till January 1998. However, I stopped payment after that since there was no progress in construction.

My strategy: I approached the State Commission with no legal assistance

My victory: The commission asked the developers to refund Rs 15 lakh along with interest of 15% per year. However, I wanted the flat and not the money, and so I approached the National Commission. The developers were ordered to pay an additional Rs 7.5 lakh as compensation or provide me with an alternative apartment of similar size and price. I am now planning to take the matter to the Supreme Court.

Company response: No reply to our queries

Next page: Loans - Help for lending 



Help for lending

Even if you’ve never been a borrower, you’ll know how desperately finance companies try to woo you. And if you have given in and taken a loan, chances are that you’ve found, to your cost, that in their hurry to sell you the loan, the company has misled you regarding the costs and documents. And after that, you are at the lender’s mercy. Recently, a borrower committed suicide after recovery agents repeatedly threatened him.

The sad thing is that such drastic measures are not needed to get the lender off your back. There are plenty of legal redressal mechanisms available—covering everything from delay in disbursing a loan (which is held to be deficiency in service) to defaults.

Banks are also liable for deficiency in service in cases where they fail to return the security documents even after repayment of the whole loan. This invariably happens in many cases where the borrower wants to transfer the loan amount to some other account.

Did you know that you have the right to receive fair treatment even if you have defaulted on paying your EMIs? That means recovery agents cannot use illegal or bullying tactics to recover the asset. The Supreme Court ruled that: “The recovery of loans or seizure of vehicles can be done only through legal means. Banks cannot employ goondas to take possession by force.”

The Indian Banks Association has now formulated a model code for collection of dues and repossession. But since this is a voluntary code, there’s no guarantee that banks will implement it.

Your rights

  • Loan applications must be processed within four weeks
  • Be informed of all charges related to loan applications, refunds, prepayment options
  • Grounds for rejecting a loan
  • Be informed of any change in terms and conditions, interest rate and fee on services
  • To get a copy of loan documents, along with relevant enclosures

Where to seek redress

  • Grievance cell of the bank
  • Nodal officer of the bank (if the grievance cell does not solve the problem)
  • Banking ombudsman (if the complaint is not resolved by the bank within a month)
  • Deputy Governor, Reserve Bank of India
  • Consumer/civil courts

CASE STUDY:  S Vijayalakshmi (with husband), DelhiS Vijayalakshmi with husband

My fight: I had taken a loan from Citicorp Maruti Finance. I was in the process of making a one-time settlement with Citibank. When this process was still on, the car was forcibly taken from me and sold.

My strategy: I took the case to the District Forum in Delhi in June 2003. I hired a lawyer because I was afraid of facing such a large company alone.

My victory: The company was ordered to refund an amount of Rs 1.5 lakh, the market value of the car, along with interest at 9% per year from the date of filing the complaint. I also won Rs 10,000, which the company was asked to pay towards mental harassment and cost of litigation. I am still waiting for the refund.

Company response: In reply to our queries, Citibank says it has filed an appeal against the decision in the Supreme Court.

Next page: Banking - Bank on the law


Bank on the law

You assume your valuables are safe with banks. Until you ask Mahendra Singh Siwach. His locker at Punjab & Sind Bank, Meerut, had been broken open and jewellery worth over Rs 17 lakh had vanished.

The bank admitted that it had broken the lock because the locker was still in the name of the person who owned it before Siwach. The consumer court ruled against the bank, which was ordered to reimburse the value of the goods in the locker, as well as 9% interest and Rs 25,000 as costs.

Not all cases against banks are so bizarre. Take that of Lt Col Rajesh Yadav, who had applied for a new debit card as his old one had expired. He did not get a new card but Rs 45,000 had been debited from his account on account of several purchases made on that card.

Upon investigation, it was found that none of the transaction slips through which the alleged purchases were made had Yadav’s signature. He took the case to the State Commission in Delhi, which ruled that: “It is obligatory upon the service provider to ensure beyond reasonable doubt as to the delivery of the card to the person concerned”. The bank was directed to refund the debited amount and also pay Yadav Rs 35,000 as compensation for mental agony.

Generally, complaints against banks relate to withholding the amount due on a fixed deposit after its maturity, delayed payment of term deposits on maturity, delay in payment of proceeds of premature encashment of deposits. All these amount to deficiency in service under the Consumer Protection Act.

Remember that you can also take banks to court for wrongful dishonour of cheques or even for rude behaviour of its officials. Depositors who have lost money in non-banking finance companies can approach the Company Law Board against such institutions. Unfortunately, few investors are aware of this.

Your rights

  • Get monthly account statements
  • Be kept informed about changes in interest rate and fees on services
  • Know the identity and authority of the bank representative
  • Receive interest on delayed payments that accrue to you
  • Limited liability in case of loss of debit card

Where to seek redress

  • The bank’s customer service department
  • Nodal officer of the bank (if you do not get a response within 10 days from customer service)
  • Banking ombudsman (if the bank does not reply within a month, rejects the complaint, or you are not satisfied. If the complaint is not settled within a month, the ombudsman passes an award)
  • Deputy Governor, Reserve Bank of India (the appeal must be made within 45 days of the award)
  • Consumer/civil courts

CASE STUDY: Surya Narayan Saxena, DelhiSurya Narayan Saxena

My fight: I had a savings account with UTI Bank (now Axis Bank). In March 2003, I found that the balance amount in my account was Rs 3.29 lakh instead of Rs 3.83 lakh. The bank also paid a lower amount of interest on my fixed term deposit. In March 2006, I filed a complaint in the district consumer redressal forum against the bank.

My strategy: I took the case myself to the consumer forum and did not hire a lawyer or any other legal expert

My victory: After six hearings (which took two years), the bank was ordered to pay me a lump sum of Rs 1 lakh for the actual loss I incurred, as well as mental agony, harassment and physical discomfort I faced due to the negligent, indifferent and insensitive attitude of the bank and its representatives. I am still awaiting payment.

Company response: No reply to our queries

Next page: Stocks - Stock remidies


Stock remedies

Did you know that non-redressal of investor complaints can lead to the suspension of a listed company from the stock exchange?

A consumer court ruling held that where a company invites deposits from the public, promising attractive interest rates, security of investment, and prompt repayment at the end of a stipulated term, the depositor is a consumer under the Consumer Protection Act.

The consumer court has the power to direct the company to pay all the outstanding amounts due to the depositor, and also order payment of compensation for any loss, harassment and mental agony caused to the depositor.

When the complaint is regarding a listed company, investors can inform the stock exchange where the company is listed. The exchange then forwards the complaints to the company concerned and directs it to solve the matter within 15 days.

If there are over 25 such complains pending with the company for 45 days or more, the exchange suspends trading in that scrip.

If the company is not listed, you can approach the Registrar of Companies of the Department of Corporate Affairs for redress.

Complaints such as non-receipt of dividends or electronic share certificates after transfer or debenture-related issues can be taken up with the Securities and Exchange Board of India (Sebi), which can penalise the companies for failing to redress such grievances.

Your rights

  • Receive annual reports and notice on AGMs
  • Voting rights at AGMs and EGMs
  • Intimation on dividends declared by the company
  • Intimation on buyback and any new venture
  • Receive intimation on shares purchased within 15 days of settlement

Where to seek redress

  • The compliance officer of the concerned company
  • Investor grievance cell of the stock exchange (in case of listed companies)
  • Registrar of Companies (in case of unlisted companies)
  • Sebi’s grievance cell

CASE STUDY: Ashok Sharma, BhopalAshok Sharma

My fight: I had around 4,000 shares in Vadilal Industries, BN Rathi Securities and Jhunjhunwala Vanaspati. All these companies declared dividends for 2005-6, but I did not receive any of this.

My strategy: I did not use any legal help. Instead, I approached the Investor Helpline in December 2006 for aid

My victory: The companies were directed to send me the dividends, and I have since received the amount

Company response: No reply to our queries

Next page: Mutual Fund - For mutual benefit


For mutual benefit

Most complaints against mutual funds relate to delay or nonpayment of redemption proceeds.

According to Securities and Exchange Board of India (Sebi) guidelines, a mutual fund must send the dividend warrants within 30 days of the declaration of dividend, and the redemption or repurchase proceeds within 10 working days from the date request.

If there is a delay, the asset management company is liable to pay interest as specified by Sebi from time to time (currently 15%).

There are cases like Aashima Goel’s. Her application for redemption of units was rejected; the company said that her name was not on the form (her account number was).

Goel approached the state commission, which said: “If the company was so particular, it could have sent a cheque in her name, mentioning the account number.”

Consumer courts have, in the past, upheld the principle that a delay in payment is a deficiency of service. For instance, mutual funds cannot increase the load beyond the level mentioned in the offer document.

Similarly, timeframes have been laid out for redemptions, dividends or statements of account. If the guidelines are not followed, investors can approach Sebi for redressal.

Your rights

  • Copy of fund’s offer document and scheme details
  • Unit certificates confirming title within 30 days from the date of NFO closure
  • Receive dividends 30 days from the date of declaration
  • In case of SIPs, monthly statement and unit value
  • Fund’s portfolio holdings at least every quarter

Where to seek redress

  • Investor service centre of the asset management company
  • Office of Investor Assistance and Education, Sebi
  • Consumer courts

CASE STUDY: Kartavya, HyderabadKartavya

My fight: I had applied for mutual fund units with Sundaram Mutual Fund under its Small- and Mid-Cap scheme. However, I was allotted units under the Select Mid-Cap scheme. The company took a unilateral decision to allot me those units, because it claims that my cheque reached them a day after the NFO closed.

My strategy: I approached the Investor Helpline for assistance

My victory: The helpline has taken up my case with the company, and I am yet to get my money back.

Company response: No reply to our queries