[anjan_c2007]

HDFC Bank's auto loan department was in the news in 2020, when it was detected that half a dozen senior and middle level executives and the teams down below in the hierarchy were hand in glove and were indulging in unfair trade practices by compulsorily selling third party, non financial products to their auto loan customers. The dispute was regarding GPS devices being appended in the billing and sold to unsuspecting and gullible customers who were taking HDFC auto loans. It was found that these devices were also helpful for the bank to track defaulters at a later date. The strategy bombed and after the exposure in 2020, HDFC Bank was on the defensive. Soon RBI also came into the picture and fined them Rs 10 crores for indulging in unfair practices and for contravening its regulatory directions.

Full news on this Economic Times link from 18.06.2021 :-

https://m.economictimes.com/industry...w/83604559.cms

Last year it was revealed that some employees at the auto loans department allegedly forced customers to buy GPS devices bundled with car loans. It was found that some customers were not even aware of purchasing such a product till the loan documents were checked. These errant employees started forcefully bundling the GPS devices with car loans to meet sales targets and potentially track borrowers in the event of a default.

And after a lot of criticism regarding such unfair trade practices, the HDFC Bank has relented yesterday and has agreed to repay customers the commission for the GPS devices sold, totally amounting to Rs 40 crores, between 2014 till 2020. The unscrupulous practice went on unheeded until a whistle-blower removed the lid and the matter became public.

It is quite unbelievable that a reputed bank with a very good reputation will indulge in such acts at the behest of some overambitious and hyperactive executives with the support of staff members to mislead and dupe customers. We hope the bank takes punitive action against the delinquent and tainted employees to restore its reputation.

[Researcher]

Originally Posted by anjan_c2007

It is quite unbelievable that a reputed bank with a very good reputation will indulge in such acts at the behest of some overambitious and hyperactive executives with the support of staff members to mislead and dupe customers. We hope the bank takes punitive action against the delinquent and tainted employees to restore its reputation.

I have been seeing a rise in such shady practices and even consumers are not questioning much to take the easier way out. Probably the recent rise in disposable income comes to play. Few examples that I have seen myself:

1. 20-30% higher quote from dealer for insurance? Let it slide, because who wants to ruin the car purchase experience for such small amount of money.

2. Additional 2-2.5% charge if we pay by card? We are ok as long as it does not ruin our experience of the purchase.

3. Handling charges? Many do not even know that it is illegal.

Unfortunately, for us as consumers, legal awareness is still very much a work in progress for most. And even if the matters are taken to court, not everyone has the appetite for the long drawn battle. As long as we, as consumers, do not object strongly and stick to the right thing, I do not see any end to such stories.

[avira_tk]

Originally Posted by anjan_c2007

..
It is quite unbelievable that a reputed bank with a very good reputation will indulge in such acts at the behest of some overambitious and hyperactive executives with the support of staff members to mislead and dupe customers. We hope the bank takes punitive action against the delinquent and tainted employees to restore its reputation.

This is not one bit surprising, unless you don't know how the bank deals with customers on a usual basis. This is the end result of cross selling high margin products that aren't of any use to the customer. They've run out of headroom for growth, hence the cheap tricks, I'm sure everyone was hand in glove, you don't score crores in commission for nothing.

[PaddleShifter]

When I bought my first car in 2010, I was not eligible for loan so my father bought the car in his name and took loan from State Bank of Patiala.

We were sent by the bank manager to the main branch to collect the draft and the lady dealing with us there asked us to get a mandatory insurance for which we paid around 8k.

She said that this insurance in mandatory for every customer in order for the bank to recover their loan in case of any mishappening.

We were later told clearly by the bank manager of our bank (where we were dealing and I had an account) that the insurance was sold solely for “personal gains” by the lady at the main branch and so such mandatory insurance is needed. Had we called him, he would have got that 8k expense removed.

Whenever discussing a car loan (More than dozen friends and colleagues have asked me to accompany them), I always ask to print the detailed EMI breakfown (usually an excel sheet) of all the EMIs with principle and interest values per EMI. We also insist on prividing all expenses (file charges etc) upfront with no surprises left for later part.

[haisaikat]

I have similar experience of dealing with HDFC Bank for my last auto purchase. They were adamant about not approving the loan unless I buy add-on insurance products from them. And they even gave it in writing in email as they advertised them as bundled products.

I told them clearly by citing features that Car insurance will be from the dealer as it had more features but they came up with other products. Eventually, the cheapest among them was a Garage to Garage insurance product from HDFC Ergo where I would get a daily stipend for any insurance claims where my car stays in the garage and I cannot avail it.

It was not a bad product for 8K INR but surprisingly I did not have any claims during 1st year of my ownership.

Question: Why did I go with them? The only reason was their approved amount was the highest in the market (almost 100% on-road) owing to my salary account with them.

Frankly, I wanted to get a car loan from a PSU product this time after seeing how conservative the repayment terms are in HDFC during my first auto loan from them back in 2007. In 12 years, the situation did not change, as they continued to be the highest amount financer and I again fell for them.

Our PSUs are penny wise and pound foolish, after such lengthy verification they only offered me 85% finance and they are busy fishing the likes of Maliya and Choksi. They are the reason why Private Players get the chance to do such things in the first place.

Unfair practices are common in all sectors be it private or PSU attributed to aggressive targets wherever there is sales involved and people get desperate for meeting their targets.

[aboveallkaran]

Even I was forced buy the same brand GPS device, without informing me about it from ICICI Bank. As soon as the loan was sanctioned, I was told about it. When I hesitated, they told its mandatory.

[V.Narayan]

I have a very different take on this which I suspect will not find favour with those who may have taken a car loan from a bank. I view RBI's approach to be counter productive in an economy that abounds in loan defaults, non-performing assets and a court system that makes it all but impossible for a lender, any lender or creditor, to recover his money, i.e. his asset, from a borrower who chooses to default for what ever reason.

A bank in all developed countries has a right to know where its asset or other collateral security is and the right to repossess it. Instead of this rather anal view the RBI should make it mandatory for assets like automotives to be GPS tagged. This is the same worthy RBI that for two decades ignored the burgeoning NPA problem in the economy till an outsider like Raghuram Rajan brought it up as the single biggest factor that could derail the integrity of our financial system.

If banks knew that the RBI-Court-recovery system can work in its favour on defaults they rate of interest would over time come down. Good borrowers, I assume like most on Team BHP, actually pay higher risk-weighted interest rates for all those nasties who default. Methods like this GPS tagging that could be one step forward to reducing willful default and facilitate repossession of the banks asset i.e. the car/truck.

In an economy where the PSU banks sit on the highest ratio of non-performing assets to total assets in the top 20 economies is it a surprise that the worthies at RBI have once again trampled on a bank trying to protect its balance sheet. Those borrowers who don't like the GPS can go borrow from 50 other banks. It is not as if HDFC Bank is holding them to gun point.

PS :I have no professional or personal link to HDFC Bank.

[xway]

Yes, most banks are the same. I also have been a victim of HDFC bank earlier.


HDFC Bank Fraud -

They sold some Savings Assurance Plan on which returns were guaranteed and amount to be 2.5 times the recurring investment on maturity of 10 years.

They even gave it in writing with all the computations and returns.

And after investing 50,000 + 5000 other charges per year for 10 years, all I got was 612000 including the amount invested, so a nett of 62000 after investing such huge money for 10 years.

Even Fixed deposit return would have been at least triple.


Kotak Bank -

This bank is most fraudulent and beware before getting lured by their schemes.

I get Debit Card charges every year, inspite of having a account in which there are no charges for it. Every year I have to call and they reverse, but their policy seems charge everyone and if someone calls then reverse it as most unsuspecting people will not be bothered for all the trouble.

Its a pain to call them as most are automated responses, and a person interaction is mostly not available.

[Everlearner]

Originally Posted by V.Narayan

A bank in all developed countries has a right to know where its asset or other collateral security is and the right to repossess it. Instead of this rather anal view the RBI should make it mandatory for assets like automotives to be GPS tagged.

Good borrowers, I assume like most on Team BHP, actually pay higher risk-weighted interest rates for all those nasties who default. Methods like this GPS tagging that could be one step forward to reducing willful default and facilitate repossession of the banks asset i.e. the car/truck.

This statement is absolute true. Good borrowers like us are bearing the brunt of all wilful defaulters who play with the system.

But, I would like to also highlight that Banks should be more responsible in their approach. Unfortunately, Banks have a very cunning approach to upsell/cross sell products to unsuspecting customers. Banks should work on their integrity as well.

[avira_tk]

Originally Posted by V.Narayan

I have a very different take on this which I suspect will not find favour with those who may have taken a car loan from a bank. I view RBI's approach to be counter productive in an economy that abounds in loan defaults, non-performing assets and a court system that makes it all but impossible for a lender, any lender or creditor, to recover his money, i.e. his asset, from a borrower who chooses to default for what ever reason.

A bank in all developed countries has a right to know where its asset or other collateral security is and the right to repossess it. Instead of this rather anal view the RBI should make it mandatory for assets like automotives to be GPS tagged...

PS :I have no professional or personal link to HDFC Bank.

Agree with you on the point of tracking assets, but the bank in question lends only to the highest quality borrower. This means salaried people who will repay, the reason they forced the customers to take the gps is to score a commission. This would be called bribery in a government office, but if the crook uses terms like front loading and asset tracking, then, it's all process.

They have high fees, penalties and bundled products, the reason they are successful is because they had an edge with respect to technology, no longer the case as they are banned from new credit card issuance for now. Banks have enough money to track delinquent borrowers, this GPS thing was just fraud.

[LoneRidder]

Originally Posted by V.Narayan

I have a very different take on this which I suspect will not find favour with those who may have taken a car loan from a bank.

A bank in all developed countries has a right to know where its asset or other collateral security is and the right to repossess it. In an economy where the PSU banks sit on the highest ratio of non-performing assets to total assets...

Sorry Sir, completely disagree with your views. Banks having NPAs doesn't justify them to push non banking products. They should factor these overheads under expenses and simple increase interest rates on loans, or find some other means to ensure their loans are secure. Showing a lower interest rate and adding other costs later is definitely a fraudulent act. These days banks smartly add these additional costs back to the loan amount itself so the customer will not even actually be knowing about it.

Not only PSU banks, there are many private banks also that have gone into distress.

Vehicle loans are still relatively safer loans compared to personal loans. Next time they may end-up putting GPS tags on individuals taking personal loans

[jagzrk]

I think the issue of RBI fining banks is not because they mandated GPS devices on vehicles but rather "charged" for them. I think this does not fit somewhere in the legal banking framework. In fact, if they had just increased the processing fee to accommodate device costs and then bundled the device, there would have been no issue.

[aaychat]

Originally Posted by V.Narayan

A bank in all developed countries has a right to know where its asset or other collateral security is and the right to repossess it. Instead of this rather anal view the RBI should make it mandatory for assets like automotives to be GPS tagged. Methods like this GPS tagging that could be one step forward to reducing willful default and facilitate repossession of the banks asset i.e. the car/truck.

I get your point but not sure it will work. Do you know that most of the defaults involve the borrower running away with the car or is it simply that they default? If it is the latter, I don't know how a GPS device will prevent that. I would imagine that running away with the vehicle would be quite difficult in today's day and age with surveillance at every street corner/toll/entry and exit points. Would it even be worth it for one car? You would need to be in hiding perpetually it's not like you can go to another bank and get another loan after that. For the most part, they share such default information with one another.

I suspect a lot of these scamsters swindle away parts etc but not the entire car. Also, wouldn't someone with that sort of intent also know how to disable the devices? Then again, I could be wrong. I don't have access to auto loan default data and the reason behind the default. Would love to hear the perspective of someone from within the industry. All I feel is that I would not be comfortable with someone else having access to my whereabouts all the time. You could say that we are tracked all the time anyway and you would be right but I do try to minimise it as much as I can within my abilities. I've turned privacy settings to the max on Google/Twitter/Instagram.

[jithin23]

My experience with HDFC is not related to auto loan but I faced an issue with their credit card division.

Since I have a salary account with HDFC Bank, I got a call one day for a credit card and I took it because the person had told no minimum charges for the card and no charges on cash withdrawal. I didn't use the card for a month and I was still charged with minimum charges. This got me agitated and gave an earful to the person who processed my card and got the credit card cancelled.

Sometimes it's not about the minimum balance amount or charges, it's about the integrity of the company and the way it's people behave or commit to customers.

That way PSU banks are better(though they are not saints) and some banks don't chage or fine the customer for foreclosure. One more thing is why do the banks put a heavy fee on the foreclosure charges (I know the interest earned is their bread and butter), and why do they stop a person who wants to be debt free sooner in his/her life(by overcharging in foreclosure or to keep hidden caveats).

[headbanger]

Originally Posted by V.Narayan

I have a very different take on this which I suspect will not find favour with those who may have taken a car loan from a bank.

Agree with you in principle. But the question is not what HDFC bank is doing, rather how they are doing it.

As a starter, just share two quotes with a prospective customer and incentivise the quote with GPS device. The customer will end up getting educated, the bank will earn brownies for innovation and transparency remains intact. Why indulge in malpractice of concealing information if the proposition can be a win-win?

The problem lies with the incentive being given to sales folks by selling these high margin products and the sales folks end up doing what they think is their birth right - indulge in mis-selling.

And this ain't only HDFC, almost every other mainstream bank tries this in one way or the other. During one of usual bank visits, I couldn't stop myself to barge in and stop ICICI sales folks sell a highly risky/doubtful product to a family comprising a gullible single parent and old grandparents.