How free are the freebies?

While it feels good to get a 'freebie',you must remember that nothing comes for free.

Are you attracted by several freebies offered by finance companies? Think twice before you sign up for these freebies which are almost like a spiders web. One must always remember that nothing comes for free and once s/he gets into the web of unwritten promises,it may become a difficult task to recover one8217;s money in the present world of complex financial products and increasing competition among financial firms.

Although there are no free lunches is a cliché,Ahmedabad-based Deepak Khatwani learnt it the harder way. He had to file a case in a consumer court to recover money which was,according to the court,deducted wrongfully from his bank account to recover his credit card dues.

The Gujarat State Consumer Disputes Redressal Commission recently dismissed the appeal against the order of the District Consumer Forum,Ahmedabad. The district forum held Healthcops ICICI Lombard General Insurance,ICICI Lombard General Insurance,and ICICI Bank liable for deficiency in services in a complaint filed by Khatwani and Ahmedabad-based Consumer Education and Research Society CERS.

Khatwani,an ICICI Bank customer,was issued a credit card in 2005 by the bank. After about two years he got a call offering him a mediclaim policy from ICICI Lombard,with a sum-insured of R 3 lakh which would be free for the next two years,after which he would have to pay the annual premium. However,after few months he found that he was billed the payment of policy along with late payment fee.

He got his policy cancelled and requested to clear the dues interest charges,late payment fee etc from his credit card. However,he was slapped with a notice to pay an outstanding,else the money would be recovered from his savings account. Khatwani with the help of CERS filed a case in the consumer forum which decided in his favour and on December 30,2011 directed ICICI Lombard to credit the deducted amount Rs 19,049 back to his bank account along with a seven per cent interest rate from the date of debit to the date of credit along with reimbursement of legal expenses and penalty for causing mental agony. The appeal filed by ICICI Lombard against the verdict was dismissed by the State Commission.

When contacted,ICICI Lombard said,the health policy was issued to the complainant after obtaining his consent. Later on,the customer approached us for cancellation of policy and the same was cancelled as per policy terms. However,matter has been contested by the complainant and the Commission has not appreciated our contentions. We are complying with the award.

Customers responsibility

Most of the agents tend to mislead and promise moon to the customer to sell financial products as that is their bread and butter. It is a customers responsibility to be aware of the charges and read documents before signing, says Kartik Jhaveri,a Mumbai-based wealth manager. The sales team of various financial institutions,be it insurance companies,asset management firms,or banks,are under tremendous pressure to get new business. The sales department of these companies,in turn,puts pressure on their agents to sell more products. The agents are offered lucrative gifts and compensation including commissions based on their performance slab. This highly increases the chances of mis-selling of a product.

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While a company directly may not be involved in a mis-selling case,it becomes very difficult for a customer to prove that a particular product was mis-sold to him/ her. Similarly there are a number of freebies offered by banks for their preferred customers like free pick up of cheque,free demand draft facility etc. One must read all the terms and conditions before opening an account or agreeing for a free credit card. For example,one of the private sector banks offers a current account for not-for-profit organisations and Trusts with several freebies. However,it expects it to keep a minimum quarterly balance of Rs 25,000.

Understanding freebies

Most banks and other financial institutions work on thin margins and largely play on the volume of the business. While there are always some or the other promotional offers run by these companies,mostly there are costs built in the product which one understands only at a much later date. Check whether the offer is relevant/ useful for you or not. What is the point of buying a product or opening an account which may turn out to be unnecessarily costly for you. Never trust the executive/ manager blindly, says Suresh Sadagopan,CEO,Ladder7 Financial Services.

One must be particularly careful about buying a product on phone. While most executives would tell you that the call has been made by the company itself,and is being recorded,you would be better off to do the proper due diligence. There might be someone selling you a really bad product making it free for sometime or by offering you a discount. Be careful of such calls and never say yes unless you are very sure, cautions Sadagopan.

The credit card users should be smart enough to read the documentation that comes with it. The interest charged on its outstanding is one of the most expensive. Once you agree for some deduction against your credit card,it becomes a difficult task to recover your money and may involve painful legal process. Whether it is a health,life or travel insurance do insist on details and charges before agreeing.

ritukant.ojhaexpressindia.com