RBI gets tough on card issuers

By Our Special Correspondent

Mumbai

July 24: The Reserve Bank of India (RBI) has provided for stringent penal action for banks which issue unsolicited credit cards.

In a notice to all scheduled commercial banks, the RBI said 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 bank which issued this card should not only reverse the charges but also pay a penalty without demur to the recipient. The amount will be 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 for loss of his time, expenses incurred, harassment and mental anguish suffered by the person.

The RBI also said that several complaints have been received about interest rates being on the higher side. It said that for credit card dues the banks should follow the same procedure of prescribing a ceiling rate of interest including processing and other charges followed in respect of small value personal loans and loans of similar nature.

In cases where bank offer insurance cover to 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 and inform the insurance companies accordingly. The banks will also consider issuing a letter with details of the insurance company to the credit card holder.

The other instructions issued to the banks include the need to provide safeguards against misuse of lost/stolen cards, a mechanism to ensure customer’s acknowledgement for receipt of the monthly statement, not to send statements after a gap of a few years demanding payments as it is grossly unfair and educate card holders that the free credit period is lost if any balance of the previous month’s bill is outstanding. The RBI has also said that the banks should up front inform the credit card holder about the process of calculation of finance charges with illustrative examples. In the case of issue of free credit cards the bank should be transparent in issuing credit cards free of charge for the first year only.

The RBI has also said that banks should register their telemarketers with the department of telecommunications within the deadlines set by Trai and scrupulously follow RBI instructions on the National Do Not Call Registry of Trai.