Card rejection is deficiency of service

Customer can claim damage from bank for causing mental agony, say experts

National level squash player, Dipika Pallikal, has filed a case against a private sector bank because her debit card, issued by Axis Bank, was rejected when she was on an overseas trip.

This happened despite there being sufficient funds in her account. Fortunately she had another debit card which she used. This is a problem that could happen to anyone.

Reasons could be connectivity problems, the point-of-sales machine not working properly or the magnetic strip of the card may be damaged making it difficult for the transaction to go through.

In such a situation the cardholder can file a case in the consumer court since it amounts to a case of defective product as well as deficient service.

A debit card is issued against a savings bank or current account and is an assurance that an account has been opened. The account holder is paying charges for the account. So, essentially a debit card getting rejected means that the bank is not allowing the account holder to use his or her own money.

Unless there is a violation of card issuing norms, such as signature mismatch or insufficient funds, says Ramesh Vaidyanathan, Managing Director, Advaya Legal.

Customers can file a case in consumer court and claim compensation for mental agony or damage to reputation, which is what Pallikal has done. Since there is no actual loss, it is difficult to quantify the loss.

Customers can also file a civil suite, but the process could be lengthy. And it is not worth the trouble, unless the claim is large or the monetary loss is huge, Vaidyanathan adds.

According to Harsh Roongta, CEO, Apnapaisa.com, approaching the Banking Ombudsman in such a case may not be of any use since it is punitive damage.

"Approaching the Ombudsman is useful when there is some concrete monetary loss such as less interest being paid or unjustified fees. Since this is deficiency of service approaching the consumer court is a better option,'' Roongta says.

But before sending a legal notice to the bank, customers should check with the bank the reason why the card was rejected. It could be that the bank has temporarily discontinued usage of the card overseas, in which case it would have been announced on the bank's website, says V N Kulkarni, of credit counselling centre, Abhay.

Some banks had done this after a huge number of debit card frauds were reported where the transactions happened overseas while the cardholders were in India. Also, lodge a complaint with the bank with proof of the transaction being rejected and the funds available in the account at that time.

"Remember to keep a photocopy of the transaction slip because the ink on that will evaporate after a while,'' Kulkarni says.As a precaution, while travelling overseas, it is advisable to have more than one means of payment, says K V S Manian, president, consumer banking, Kotak Mahindra Bank.

"It is advisable to have either more than one debit card or have a credit and debit card. This way even if one card does not work, you can use the other one," he advises.

Another precaution customers travelling overseas should take is to enable your debit card for international usage. They must also check the limit for usage on the credit and debit card with their bank, since these are different from limits for domestic usage, Manian adds.

"This is a requirement for protection of customers as specified by the Reserve Bank of India,'' he explains.