The Reserve Bank of India on April 21 issued a fresh set of directions for banks and other lending organisations regarding the issuance of debit and credit cards.
The provisions will be effective from July 1, 2022. Here’s what you should know as a credit cardholder.
To start with, card issuers cannot issue unsolicited cards/upgradation, or insurance cover for liabilities arising out of lost cards or frauds, without the explicit written consent of the cardholder. Where a customer is billed for the same, the card issuer has to reverse the charges as well as pay a penalty.
The cardholder will not be liable for loss where any unsolicited cards has been misused before reaching the hands of the cardholder in whose name it has been issued.
There should not be any hidden charges while issuing credit cards free of charges. Also, there should be complete transparency in terms of advance and conversions of credit card transactions to equated monthly instalments. This also includes EMI conversion with interest component, which cannot be camouflaged as zero-interest/no-cost EMI.
The RBI has also come out with a list of details on other aspects related to the types of credit cards, the billing cycle and closure, as well as the transparency on minimum due, the details of which are mentioned below.
Transparency On Minimum Due
Card issuers need to be transparent on the implications of paying only ‘the minimum amount due’. A legend/warning to the effect that “Making only the minimum payment every month would result in the repayment stretching over months/years with consequential compounded interest payment on your outstanding balance” has to be prominently displayed in all the billing statements to caution the cardholders about the pitfalls in paying only the minimum amount due, the RBI said in a statement. The card issuer has to specifically explain that the ‘interest-free credit period’ is suspended if any balance of the previous month’s bill is outstanding. The card issuer has to also specify in the billing statement, the level of unpaid amount of the bill i.e., part payment beyond ‘minimum amount due’, at which the interest-free credit period benefits would not be available to cardholders.
For the same, the card issuer has to work out illustrative examples and include the same in the Welcome Kit sent to the cardholders and also place it on their website.
Also, changes in charges shall be made only with prospective effect giving prior notice of at least one month. If a cardholder desires to surrender his/her card on account of any change in charges to his/her disadvantage, he/she shall be permitted to do so without levying any extra charge for such closure, subject to payment of all dues by the cardholder.
As for billing, the card issuer has to ensure that there is no delay in sending/dispatching/emailing bills/statements, and that the customer has sufficient number of days (at least one fortnight) for making payment before the interest starts getting charged. In order to obviate frequent complaints of delayed billing, the card issuer could consider providing bills and statements of accounts through Netbanking/mobile banking with the explicit consent of the cardholder.
Card issuers also need to ensure that the wrong bills are not raised and issued to cardholders. In case, a cardholder protests any bill, the card issuer shall provide explanation and, wherever applicable, documentary evidence shall be provided to the cardholder within a maximum period of 30 days from the date of complaint.
No charges shall be levied on transactions disputed as ‘fraud’ by the cardholder until the dispute is resolved.
Any credit amount arising out of refund/failed/reversed transactions or similar transactions before the due date of payment for which payment has not been made by the cardholder, shall be immediately adjusted against the ‘payment due’ and notified to the cardholder.
Closure Of Cards
Card issuers shall seek One Time Password (OTP) based consent from the cardholder for activating a credit card, if the same has not been activated by the customer for more than 30 days from the date of issuance. If no consent is received for activating the card, the card issuer shall close the credit card account without any cost to the customer within seven working days from date of seeking confirmation from the customer. In case of a renewed or replaced card, the closure of an inactivated card shall be subject to payment of all dues by the cardholder.
Card issuers will also have to ensure that the telemarketers they engage, comply with directions/regulations on the subject issued by the Telecom Regulatory Authority of India (TRAI) from time to time while adhering to guidelines issued on “Unsolicited Commercial Communications – National Customer Preference Register (NCPR)”. The card issuer’s representatives shall contact the customers only between 10:00 am in the morning and 7 pm in the evening.
As for closure of credit cards, any request for the same has to be honoured within seven working days by the credit card issuer, subject to payment of all dues by the cardholder. Subsequent to the closure of credit card, the cardholder shall be immediately notified about the closure through email, SMS, etc.
Cardholders also need to be provided with an option to submit request for closure of credit card account through multiple channels, such as helpline, dedicated email-id, Interactive Voice Response (IVR), prominently visible link on the website, Netbanking, mobile app or any other mode.
The card issuer shall not insist on sending a closure request through post or any other means which could lead to a delay of receipt of the request. Failure on the part of the card issuer to complete the process of closure within seven working days shall result in a penalty of Rs. 500 per day of delay payable to the customer, till the closure of the account provided there is no outstanding in the account.
Also, if a credit card has not been used for a period of more than one year, the process to close the card shall be initiated after intimating the cardholder. If no reply is received from the cardholder within a period of 30 days, the card account shall be closed by the card-issuer, subject to payment of all dues by the cardholder. The information regarding the closure of card account shall also accordingly be updated with the Credit Information Company/ies within a period of 30 days.
Subsequent to closure of credit card account, any credit balance available in credit card accounts will have to be transferred to the cardholder’s bank account. For this, card issuers will have to obtain the details of the cardholder’s bank account, if the same is not available with them.
Types Of Credit Cards
As regards the types of credit cards to be issued to the cardholders, the RBI has said:
Card issuers may issue credit cards/charge cards to individuals for personal use together with add-on cards wherever required.
Card issuers may also issue cards linked to overdraft accounts that are in the nature of personal loans without any end-use restrictions subject to the conditions as stipulated in the overdraft account.
Card issuers may issue business credit cards to business entities/individuals for business expenses. The business credit cards may also be issued as charge cards, corporate credit cards or by linking a credit facility such as overdraft/cash credit provided for business purpose as per the terms and conditions stipulated for the facility concerned. Corporate credit cards can be issued together with add-on cards wherever required.
The liability of the corporate/business entity on account of business cards shall form part of their total assessed credits for compliance to instructions issued by the RBI on Exposure Norms as well as Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances.
The add-on cards shall be issued only to the persons specifically identified by the principal cardholder under both personal and business credit card categories. Add-on cards shall be issued with the clear understanding that the liability will be that of the principal cardholder.
Similarly, while issuing corporate credit cards, the responsibilities and liabilities of the corporate and its employees shall be clearly specified. The liability of the corporate/business entity shall form part of its assessed credits.