HOME LOAN COMPANIES ARE SUPPOSED TO ASK FOR ALL PAPERS AT ONE GO AND GIVE A TIME LIMIT WITHIN WHICH THE LOAN WILL BE PROCESSED Housing finance companies and banks that deny loans to consumers without any valid reason had better mend their ways. Or else, they will end up paying huge sums as compensation to consumers whom they have treated shabbily.A recent order of the apex consumer court, the National Consumer Disputes Redressal Commission, leaves no doubt about the way consumer court will treat such complaints from consumers. In fact in this case , in addition to awarding the consumer compensation, the national commission also wanted an inquiry to be held against the official who denied the loan to the complaint, despite his completing all formalities. “This is a fit case where inquire must be made by LIC Housing against its officials”, the commission odserved in its order.An application for a housing loan was sent by the complainant, Rajiv Rastogi to LIC housing, for construction a house at barotiwala in Himachal Pardesh. As per the requirement, the consumer deposited all informed by the agent on November 26, 2007, that the loan had been sanctioned. However, when no cheque or draft was issued by the housing finance company made enquiries and was told that the validity of the offer had expired as the loan papers had not been forwarded.Surprised, Rastogi contacted the agent, who again asked for more papers. This was given and he informed the complained on June 7, 2008, that the loan had been sanctioned. But again, the loan was not disturbed. He even sent then a legal notice on August 29, 2008, but got no response. Exasperated, the consumer took back the original documents and got the loan from a bank.He decided that the housing finance company must pay for its behaviour toward him. He, therefore, filled a complaint before the District Consumer Disputes Redressal Forum, which held the housing finance company guilty of deficient service. It 50,000 as compensation within 30 days , failing which pay 12 percent interest  on the amount, calculated from the day the complaint was first filed.

When the consumer court at the state level upheld this verdict, the housing finance company filed a revision petition before the national commission, arguments that the loan had not been sanctioned because the consumer or the applicant had not submitted the required papers.

Dismissing this contention, the apex consumer court pointed out that all title deeds demanded by the housing finance company had been submitted by the consumer, yet the loan had not been disbursed on some pretext or the other. So in addition to the compensation by the lower consumer court, litigation costs of Rs 15000 should  be paid to the consumer, the commission said(LIC housing finance vs shri Rajiv Rastogi and others, decided on july 10,2012). From what one can see from the order of apex consumer court, the housing finance company obviously did not ask for all the papers in one go, as required, but in serval instalments, thereby causing harassment to the consumer. Even after the papers were submitted, the sanctioned loan was not disbursed, eventually forcing the consumer to seek the loan from another source. In the barging, he lost considerable time and this not only delayed his construction, but also caused him mental agony.

As per the ragulator’s instructions the lender is not only supposed to ask for all papers in one go, but also give an acknowledgement of  having received the application and also give a time limit within which the application would be processed. If for any reason, the loan is not sanctioned, then the application has to be informed of it in writing, giving reasons for such denial. The RBI has also underscored the need for transparency in the entire loan application and disbursal process, which again was lacking here.