Please refer to the Master Circular on Credit Card Operations of banks
(Circular No.DBOD.FSD.BC.6/24.01.011/2008-2009) dated July 1, 2008.
2. In this connection, we advise that the Reserve Bank of India had
undertaken a study on the credit card operations of banks, based on the
complaints received by the Bank as also by the Offices of the Banking
Ombudsmen. The gist of the recommendations of the study together with
existing RBI instructions, if any, and the action required to be taken by
banks in this regard are given in the Annex.
Banks may ensure that action is taken by them as shown in column 4 of the
Annex. The study report has also
made certain recommendations relating to recovery of credit card dues
through recovery agents in respect of which a separate circular has
already been issued by the Bank (DBOD.No.Leg.BC.75 /09.07.005/2007-08
dated April 24, 2008).
3. Issue of Unsolicited Cards
Attention of banks is invited to paragraph 6.1 (a) of the Master
Circular on Credit Card Operations of banks dated July 1, 2008 wherein
banks have been advised that unsolicited credit cards should not be issued
and that in case an unsolicited card is issued and activated without the
consent of the recipient and the latter is billed for the same, the card
issuing bank shall not only reverse the charges forthwith, but also pay a
penalty without demur to the recipient amounting to twice the value of the
charges reversed.
In addition, the person in whose name the card is issued can also
approach the Banking Ombudsman who would determine the amount of
compensation payable by the bank to the recipient of the unsolicited
credit card as per the provisions of the Banking Ombudsman Scheme, 2006
i.e for loss of complainant’s time, expenses incurred, harassment and
mental anguish suffered by him. Further, there have been instances where
unsolicited credit cards issued have been misused before reaching the
person in whose name the card is issued. It is clarified that any loss
arising out of misuse of such unsolicited cards will be the responsibility
of the card issuing bank only and the person in whose name the card has
been issued cannot be held responsible for the same as indicated at item
(4) – Column (4) of the Annex.
4. Insurance cover to credit card holders
It has been decided that in cases where the banks are offering any
insurance cover to their credit card holders, in tie-up with insurance
companies, the banks may consider obtaining in writing from the credit
card holder the details of nominee/s for the insurance cover in respect of
accidental death and disablement benefits. Banks may ensure that the
relevant nomination details are recorded by the Insurance Company. Banks
may also consider issuing a letter to the credit card holder indicating
the details regarding the name, address and telephone number of the
Insurance Company which will handle the claims relating to the insurance
cover.
5. Banks are advised to scrupulously adhere to these instructions and
any violation/s would be viewed seriously.
|
Sl. No.
1. |
Issue in brief
2. |
Gist of recommendations
of the Credit
Card Study
3. |
Existing RBI instructions,
if any on the issue and
action to be taken by banks
4. |
|
I. Card Issuance |
1. Prudence in issuing credit cards |
The banks need to ensure prudence while
issuing credit cards. |
Banks have already been advised vide
paragraph 2(a) of the Master Circular on Credit Card
Operations(Circular No.DBOD.FSD.BC.6/24.01.011/2008-2009 dated July 1,
2008) that they should independently assess the credit risk while
issuing cards to persons, especially to students and others with no
independent financial means. It is reiterated that banks need to
ensure prudence while issuing credit cards. |
|
|
2.Reasons for rejection of credit card
applications to be intimated |
The banks are required to inform the
reason for rejection of credit card applications as per the extant RBI
guidelines. |
In terms of the instructions contained
in the circular DBOD.No.Leg.BC.65/09.07.005/2006-2007 dated March 6,
2007, banks have been advised that in case of all categories of loans
irrespective of any threshold limits, including credit card
applications, banks should convey in writing the main
reason/reasons which in the opinion of the bank have led to the
rejection of the loan applications. It is reiterated that banks should
convey in writing the main reason/reasons which have led to the
rejection of the credit card applications. |
|
|
3. Consent for issue of credit cards |
The consent for the cards issued or the
other products offered along with the card has to be explicit and
should not be implied. |
Banks have already been advised vide
paragraph 6.1(a) of the Master Circular on Credit Card Operations
(Circular No.DBOD.FSD.BC.6/24.01.011/2008-09 dated July 1, 2008) that
unsolicited credit cards should not be issued. It is further
clarified that consent for the cards issued or the other products
offered alongwith the card has to be explicit and should not be
implied. |
| |
4. Losses arising out of misuse of unsolicited
credit cards |
Any misuse of an unsolicited card or
any other product associated with the issue of such an unsolicited
card is the responsibility of the card issuing bank only and cannot be
laid at the door of the customer. |
There have been instances where
unsolicited cards issued have been misused before reaching the person
in whose name these have been issued. It is clarified that any loss
arising out of misuse of such unsolicited cards will be the
responsibility of the card issuing bank only and the person in whose
name the card has been issued cannot be held responsible for the
same. |
| |
5. Safeguards against misuse of lost/stolen
cards |
In order to reduce misuse of lost
cards, banks may consider issuance of –
(i) Photo cards
(ii) Cards with a PIN
(iii)Signature laminated cards |
With a view to reducing the instances
of misuse of lost/stolen cards, it is recommended to banks that they
may consider issuing (i) Cards with photographs of the cardholder,
(ii) Cards with PIN and (iii) Signature laminated cards or any other
advanced methods that may evolve from time to time. |
| |
6.Explicit option to share customer
information with other agencies |
The banks should explicitly state and
explain to the customer the full meaning of their disclosure clause.
While reporting to Credit Information Companies/CIBIL is mandatory,
all the other clauses added making the customer provide his consent to
parting with his personal information and credit history to a host of
agencies is purely voluntary and should not have any bearing on the
issue of the card. |
Instances have come to light where
banks, as part of the MITCs, obtain the consent of the customer for
sharing the information furnished by him while applying for the credit
card, with other agencies. It is clarified that banks should give the
customer the option to decide as to whether he is agreeable for the
bank sharing with other agencies the information furnished by him at
the time of applying credit card. The application forms for credit
cards may be suitably modified to explicitly and clearly provide for
the same. Further, in cases where the customer gives his consent for
the bank sharing the information with other agencies, banks should
explicitly state and explain clearly to the customer the full
meaning/implications of the disclosure clause. |
|
II Card Statements |
7.Acknowledgement for monthly statements
|
The banks should have a mechanism to ensure that
customer’s acknowledgement for receipt of the monthly statement is
taken. |
Banks have been advised, vide paragraph
paragraph 3(a) of the Master Circular on Credit Card operations dated
July 1, 2008(Circular No.DBOD.FSD.BC.6/24.01.011/2008-2009 dated July
1, 2008) that they should ensure that there is no delay in dispatching
bills and the customer has sufficient number of days (at least one
fortnight) for making payment before the interest starts getting
charged. Banks could consider putting in place a mechanism to ensure
that the customer’s acknowledgement is obtained for receipt of the
monthly statement. |
|
|
8. Undue delay in issue of credit card
statements |
Banks should be advised against sending statements
after a gap of a few years and demanding payments and the same has to
be seen as a grossly unfair act on the part of the bank. Specifying a
time limit for rectifying any errors or making a claim on the
cardholder need to be considered. |
There have been instances where banks
have issued credit card statements after undue delays and demanded
payments. Banks may ensure that credit card bills/statements are sent
to the customers promptly without any delay. Attention of banks is
invited to paragraph 4(b) of the Master Circular on Credit Operations
of banks (DBOD.FSD.BC.6 /24.01.011/2008-2009 dated July 1, 2008)
wherein it is stated that in order to obviate frequent complaints of
delayed billing, the credit card issuing bank may consider providing
bills and statements of accounts online, with
suitable security built therefor. |
| |
9. Educating customers on the implications of
paying only the ‘minimum amount due’ on credit cards |
Banks should step up their education efforts on the
implications of card holders paying only the ‘minimum amount due’. An
average credit card customer is not clear as to how the
interest/finance charges are calculated. The MITC should specifically
explain that ‘the free credit period’ is lost if any balance of the
previous month’s bill is outstanding. |
Banks should step up their efforts on
educating the cardholders of the implications of paying only the
‘minimum amount due’. The MITC should specifically explain that the
‘free credit period’ is lost if any balance of the previous month’s
bill is outstanding. For this purpose, they could work out
illustrative examples and include the same in the Welcome Kit sent to
the cardholders as also place it on their website. |
|
III Interest and other charges |
10. Excessive Interest rates/ Other Charges |
The complaints received by RBI/Banking Ombudsmen’s
offices on charges indicate that customers consider the charges to be
on the higher side. While there could be an issue of customer
education here, the banks are required to note that the interest
rate/other charges on credit card dues fall within the purview of RBI
circular on excessive interest rates issued on May 7, 2007. |
Banks have already been advised vide
RBI circular dated May 7, 2007 on excessive interest rates on advances
that they should prescribe a ceiling rate of interest, including
processing and other charges, in respect of small value personal loans
and loans similar in nature. It is clarified that the above
instructions would apply to credit card dues also.
|
| |
11. Variable Interest charges |
Some of the banks levy interest charges which vary
based on the payment/default history of the cardholder. The issue
needs to be handled transparently. |
Where banks charge interest rates which
vary based on the payment/default history of the cardholder, there
should be transparency in levying of such differential interest rates.
In other words, the fact that higher interest rates are being charged
to the cardholder on account of his payment/default history should be
made known to the cardholder. For this purpose, the banks should
publicise through their website and other means, the interest rates
charged to various categories of customers. |
| |
12. Calculation of finance charges |
As regards the amount of finance
charges, the entire amount outstanding is taken into account for
finance charge calculations, if only partial amount is paid thereby
losing the advantage of grace period given for payment. This should
be made known to the customer. |
Banks should upfront indicate to the
credit card holder, the methodology of calculation of finance charges
with illustrative examples, particularly in situations where a part
of the amount outstanding is only paid by the customer. |
| |
13. Issue of cards free of charge |
In issuing cards that are free of credit card issue
charges for the first year only, the issue needs to be handled
transparently and without any hidden charges. |
There should be transparency (without
any hidden charges) in issuing credit cards free of charge during the
first year. |
|
IV DSAs/DMAs |
14. Authentication of documents by the banks |
It is desirable that the DSAs provide to the customer
only the documents/papers authorized by the banks. It is desirable
that the banks design the modes in such a way that no disputes arise
later between the customer and the bank. Most of the complaints of
mis-selling are attributed to DSAs/DMAs. |
In terms of para 5 (c) of the Master
Circular on Credit Card operations of banks(Circular
No.DBOD.FSD.BC.6/24.01.011/2008-09 dated July 1,2008), banks have been
advised that they should have a random check and mystery shopping to
ensure that their agents have been properly briefed and trained in
order to handle with care and caution their responsibilities,
particularly on the aspects included in the Master Circular like
soliciting customers, hours for calling, privacy of customer
information, conveying the correct terms and conditions on offer etc.,
Banks are once again advised to adhere to the above instructions. |
| V Grievance Redressal
|
15.Training of call center
staff |
Banks should take efforts to properly
train their call centre staff who are presently equipped to handle
only routine complaints. |
Banks should ensure that their call
center staff are trained adequately to competently handle all customer
complaints. |
| |
16. Escalation of unresolved
complaints |
Banks should have a mechanism to escalate
automatically unresolved complaints from a call centre to higher
authorities, if a higher level of intervention is required. |
Banks should also have a mechanism to
escalate automatically unresolved complaints from a call center to
higher authorities and the details of such mechanism should be put in
public domain through their website. |
| VI CIBIL Issues |
17. Reporting to CIBIL/Credit
Information Companies |
It is desirable that the banks are made
to follow a uniform method of reporting to CIBIL/Master Card
International Negative List. |
In terms of paragraph 6.2 (c) of the
Master Circular on Credit Card Operations of
banks(CircularNo.DBOD.FSD.BC.6/24.01.011/2008-2009 dated July 1,
2008), before reporting default status of a Credit card holder to
CIBIL or any other Credit Information Company authorized by RBI, banks
should ensure that they adhere to a procedure duly approved by their
Board including issuing of sufficient notice to such cardholder about
the intention to report him/her as defaulter to the Credit Information
Company. The procedure should also cover the notice period for such
reporting as also the period within which such report will be
withdrawn in the event the customer settles his dues after having been
reported as defaulter. These procedures should be transparently made
known as part of the MITCs. The above instructions are reiterated. |
| VII Others |
18. Registration of
Telemarketers |
Banks to register all their
telemarketers with Department of Telecommunications within the
deadlines set by TRAI and scrupulously follow RBI instructions on the
National Do Not Call Registry of TRAI. |
Instructions in this regard have
already been issued to banks vide RBI Circular
No.DBOD.FSD,BC.19/24.01.011/2007-2008 dated July 3, 2007. Banks may
scrupulously adhere to the above instructions. |
| |
19. Coverage of all ATMs by CCTVs
|
The banks may be advised to cover all
the ATM sites by CCTVs so that the identity of the withdrawing person
can be established |
The banks may consider covering all ATM
sites by CCTVs so that the identity of the person withdrawing cash
from the ATM can be established. Further, the security staff posted
at ATMs may be trained adequately in this regard. |
| |
20. Prompt honouring of requests for closure
of credit cards |
A request for closure of the credit
card has to be honoured immediately by the bank. |
Any request for a closure of a credit
card has to be honoured immediately by a bank, subject to full
settlement of dues by the cardholder |
| |
21. Blocking of lost card |
A lost card should be immediately
blocked on being informed by the customer and formalities if any,
including lodging of FIR can follow within a reasonable period. |
Banks are advised to block a lost card
immediately on being informed by the customer and formalities if any,
including lodging of FIR can follow within a reasonable period. |
| |
22. Insurance cover in respect of dues
relating to lost cards |
Banks may consider introducing a cover
for the lost card liability or limiting such liability at the option
of the customers. |
Banks may consider introducing, at the
option of the customers, an insurance cover to take care of the
liabilities arising out of lost cards. In other words, only those
cardholders who are ready to bear the cost of the premium should be
provided an appropriate insurance cover in respect of lost cards. |
