This law student is on a crusade to end levy of fees on debit card transactions

This law student is on a crusade to end levy of fees on debit card transactions

Aditya AK

A student of Ram Manohar Lohiya National Law University (RMLNLU), Lucknow is battling a case in a consumer forum. His cause of action? A restaurant that wrongfully charged him a fee on a debit card transaction.

And in light of the Centre’s recent demonetisation move, Chanakya Sharma’s plaint is a significant one.

During their visit to an eatery in Goa, Chanakya and his friends were made to pay a surcharge of 2% on the bill while paying by debit card. When he sought clarification as to why this surcharge was levied, responses from both the establishment, as well as the bank, were not forthcoming. It was later brought to light that the restaurant had charged him a similar fee on a previous transaction as well.

Even after the law student served a legal notice to the restaurant, he received no response. Thus, he was prompted to file a plaint before the District Consumer Disputes Redressal Forum in South Goa.

Chanakya’s plaint centres on the Merchant Discount Rate (MDR), which is the commission paid by a merchant to the acquiring bank for every transaction. Essentially, his argument is that the merchant is required to pay the MDR to the bank, and that this burden cannot be shifted to the customer.

He produced a series of guidelines issued by the Reserve Bank of India on the topic. In these guidelines, the RBI discusses the need to reduce MDR rates so as to incentivize merchants to accept payments through debit cards.

The most significant of these guidelines was issued in September 2013. It states,

Levying fees on debit card transactions by merchants- There are instances where merchant establishments levy fee as a percentage of the transaction value as charges on customers who are making payments for purchase of goods and services through debit cards.

Such fee are not justifiable and are not permissible as per the bilateral agreement between the acquiring bank and the merchants and therefore calls for termination of the relationship of the bank with such establishments.”

Moreover, post demonetisation, the Centre had decided to waive off MDR payable to banks till December 31, with the suggestion that MDR rates – presently at 0.75% – should be slashed thereafter. However, the RBI has recently questioned this move, stating that business could become unsustainable for many banks as a result.

A few more of the restaurant’s irregularities were brought to light by the complainant. One of these is a notice in the restaurant, which says that it is not an MRP shop, and that it is governed by the “All India Tourism of Hotels and Restaurants Act”, a legislation which does not exist. Furthermore, he found that the restaurant was charging service charge on the total bill, despite claiming that their menu prices were inclusive of service tax and service charge.

The bank has been impleaded in the plaint as a pro forma party for having “acted in concert with the merchant or if not so at least having not stopped the merchant from engaging in such practices”.

As relief, Chanakya is claiming forty thousand rupees and the cost incurred as a result of filing and arguing the complaint. He has also pleaded that the bank take stern action against the restaurant and that it deposit another forty thousand rupees in the Consumer Trust Fund.

On Friday, the district forum proceeded to admit the complaint and issue notice to the respondents. The matter will now be heard on January 9 next year.

In an email to Bar & Bench, Chanakya said,

“I honestly believe that though I am representing my own case, my case represents thousands of consumers who are simply not aware of their rights.”

Read the plaint:

Bar and Bench - Indian Legal news