Consumer Protection: Bank faces higher penalty for delayed card closure

The Karnataka State Commission questioned why bank had failed to close the card in 2010, and had raised a demand after seven years

V.V. Venkatesh had a credit card issued by Standard Chartered Bank. He made a payment of ₹15,500 on August 27, 2010 and instructed the bank to close the credit card, which the bank also confirmed. 

After seven years, in 2018, the bank suddenly issued a notice claiming outstanding dues on the credit card. After a further lapse of three years, the bank issued another notice on December 25, 2020, demanding ₹33,83,173.12 as the pending amount. It followed this up with telephone calls and reminder notices dated June 15, 2022 and June 18, 2022. Venkatesh replied to all the legal notices, pointing out that the card had been closed after he had cleared all the dues. Yet the bank’s recovery agents, Shaha Finlease, kept harassing him with telephone calls demanding payment. Aggrieved, Venkatesh filed a complaint before the Additional District Consumer Commission for Bengaluru against the bank as well as the recovery agent, alleging deficiency in service and unfair trade practice. He stated that the bank had wrongly termed him a defaulter and adversely affected his CIBIL rating, because of which financial institutions rejected his loan applications. 

The bank as well as the recovery agent did not even bother to contest the case, so the commission decided it ex parte on the basis of the evidence produced by Venkatesh. The District Commission concluded that the bank had been deficient in service and had also engaged in unfair trade practice. It awarded ₹1 lakh as compensation along with 10 per cent interest from the date of the order and ₹3,000 as litigation cost. 

Venkatesh was not satisfied with the compensation awarded, so he appealed to the Karnataka State Commission. He cited a decision of the Supreme Court in a similar matter in Canara Bank v. S. Reghukumar & Anr., where the apex court had awarded ₹5 lakh as compensation. Similarly, in Anil Milkhiram Goyel v. Hongkong and Shanghai Banking Corporation Ltd., the National Commission had awarded ₹15 lakh as compensation for mental agony and ₹1 lakh as litigation cost. Venkatesh argued for the enhancement of the compensation in conformity with the observations and compensation awarded in these precedents. 

The Karnataka State Commission considered the guidelines issued by the Reserve Bank of India relating to the closure of credit cards, which stipulated that once the outstanding dues were cleared, the bank had a duty to complete the closure formalities within seven days, and any delay would result in a penalty of ₹500 per day payable to the cardholder. 

The Karnataka State Commission noted that the bank had failed to explain why it had not closed the credit card on August 27, 2010 and why it had issued a demand notice after a lapse of seven years. It indicted Standard Chartered Bank for engaging in unfair trade practices that had affected the customer for about 10 years because of an adverse CIBIL rating. 

Accordingly, by its order dated February 12, 2026, delivered by Sri Ravi Shankar for the Bench along with Sunita Channabasappa Bagewadi, the Karnataka State Commission enhanced the compensation to ₹5 lakh. It also awarded ₹1 lakh as advocate’s fees and a further ₹50,000 to cover litigation cost. 

The writer is a consumer activist