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What’s new in RBI’s guidelines for credit cards and debit cards

No unsolicited issuance of cards, recovery agents should not harass card holders, and card issuers should not share customer data without consent are some of the many new requirements stipulated by RBI.

The Reserve Bank of India (RBI) on April 21 released new guidelines for the issuance of credit cards and debit cards. “These directions cover the general and conduct regulations relating to credit, debit and co-branded cards which shall be read along with prudential, payment and technology & cyber security related directions applicable to credit, debit and co-branded cards, as issued by the Reserve Bank,” the RBI said.

These guidelines, titled Reserve Bank of India (Credit Card and Debit Card – Issuance and Conduct) Directions, 2022, will go into effect from July 1 and are expected to streamline regulations around the debit and credit cards as they will replace nineteen existing guidelines.

The guidelines introduce many new provisions such as prohibiting unsolicited issuance of cards, disallowing customer harassment by recovery agents, new requirements on transparency of interest rates, etc.

Key guidelines around credit cards

Who can issue credit cards?

  1. Non-Banking Financial Companies (NBFCs): Apart from Scheduled Commercial Banks (SCBs), Regional Rural Banks (RRBs), and scheduled Urban Cooperative Banks (UCBs), Non-Banking Financial Companies (NBFCs) with prior approval of the RBI can now issue cards. They will require a Certificate of Registration, apart from specific permission to enter into this business, the pre-requisite for which is a minimum net owned fund of ₹100 crores.

Procedures for card issuance

  1. No unsolicited issuing or upgradation of cards, loans, or other credit facilities: The issue of unsolicited cards or upgradation is strictly prohibited. In case, an unsolicited card is issued or an existing card or credit limit is upgraded without the explicit consent of the recipient and the latter is billed for the same, the card-issuer shall not only reverse the charges but also pay a penalty amounting to twice the value of the charges reversed. Unsolicited loans or other credit facilities should also not be offered to the credit cardholders without seeking explicit consent. Cardholders can also approach the RBI Ombudsman for further compensation in case of violation of this provision.
  2. Explicit, not implied consent: The consent for the cards issued or the other products and services offered along with the card shall be explicit and shall not be implied. In other words, the written consent of the applicant shall be required before issuing a credit card. Alternatively, card-issuers may use other digital modes with multifactor authentication to obtain explicit customer consent.
  3. Key Fact Statement and Most Important Terms and Conditions: Card issuers must provide a one-page Key Fact Statement along with the credit card application containing the important aspects of the card such as the rate of interest, and the quantum of charges, among others. Separately, the detailed list of Most Important Terms and Conditions, as given in Chapter VI of these directions, should be highlighted and published or sent to the customers along with the welcome kit and whenever a condition is modified.
  4. Reason for rejection: In case of rejection of a credit card application, the card issuer should convey in writing the specific reason which led to the rejection of the application.
  5. Insurance cover: Card issuers may consider introducing, at the option of the customers, an insurance cover to take care of the liabilities arising out of lost cards, card frauds, etc.

How should card issuers treat customers?

  1. No intimidation or harassment of cardholder or cardholder’s friends and family: Card-issuers and their agents should not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude upon the privacy of the credit cardholders’ family members, referees and friends, making threatening and anonymous calls or making false and misleading representations.
  2. Adhere to fair practices: To recover dues, card-issuers should ensure that they and their agents adhere to the extant instructions on Fair Practices Code for lenders.
  3. Strict customer confidentiality must be observed: With regard to the appointment of third-party agencies for debt collection, the card issuers should ensure that their agents refrain from actions that could damage their integrity and reputation and observe strict customer confidentiality. All communications issued by recovery agents must contain the name, email-id, telephone number and address of the concerned senior officer of the card-issuer whom the customer can contact. Further, card issuers should provide the name and contact details of the recovery agent to the cardholder immediately upon assigning the agent to the cardholder.
  4. Disclose only necessary information to recovery agents: Disclosure of customers’ information to the recovery agents should be limited to the extent that will enable them to discharge their duties. Personal information provided by the cardholder but not required for recovery purposes should not be released by the card issuer. The card issuer should ensure that the recovery agents do not transfer or misuse any customer information during the marketing of credit card products.
  5. Random checks of agents: Card issuers should have a system of random checks and mystery shopping to ensure that their agents have been properly briefed and trained as to how to handle customers.

Closure of Credit Card

  1. Honoured with seven days: Any request for closure of a credit card should be honoured within seven working days by the credit card issuer and cardholders should be provided with the option to submit a request through multiple channels such as the helpline, dedicated e-mail-id, Interactive Voice Response (IVR), prominently visible link on the website, internet banking, mobile app or any other mode. The card-issuer shall not insist on sending a closure request through post or any other means which may result in the delay of receipt of the request. Failure on the part of the card issuers to complete the process of closure within seven working days will result in a penalty of ₹500 per day of delay payable to the customer.
  2. Inactive cards: 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.
  3. Credit balance: Subsequent to the closure of the credit card account, any credit balance available in credit card accounts shall be transferred to the cardholder’s bank account.

Interest rates and other charges

  1. Interest charged should be justifiable and transparent: Interest charged on credit cards should be justifiable having regard to the cost incurred and the extent of return that could be reasonably expected by the card issuer. It should be in line with other unsecured loans, including processing and other charges. The card-issuers should publicise through their website and other means, the interest rates charged to various categories of customers. Card issuers should indicate upfront to the credit cardholder, the methodology of calculation of finance charges with illustrative examples, particularly in situations where only a part of the amount outstanding is paid by the customer.
  2. Transparency on APR: Card issuers should quote Annualized Percentage Rates (APR) on credit cards for different situations such as retail purchases, balance transfers, cash advances, non-payment of the minimum amount due, and late payment, if different. The method of calculation of APR should be given with clear examples for better comprehension. The late payment charges, including the method of calculation of such charges and the number of days, should be prominently indicated.
  3. Transparency in EMIs: Card issuers should ensure complete transparency in the conversion of credit card transactions to Equated Monthly Instalments (EMIs) by clearly indicating the principal, interest and upfront discount provided by the merchant/card-issuer (to make it no cost), prior to the conversion. The same shall also be separately indicated in the credit card statement. EMI conversion with an interest component shall not be camouflaged as zero-interest/no-cost EMI.
  4. Implications of paying only the minimum amount should be communicated: Card issuers should inform the cardholders of the implications of paying only the minimum amount due. A 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” should be prominently displayed in all the billing statements to caution the cardholders. For this purpose, card-issuers should work out illustrative examples and include the same in the Welcome Kit sent to the cardholders and also place it on their website.
  5. No hidden charges: There should not be any hidden charges while issuing credit cards free of charge.

Billing

  1. One-time option to modify the billing cycle: In order to provide flexibility, cardholders should be provided with a one-time option to modify the billing cycle of the credit card as per their convenience.
  2. No delay in sending statements: Card issuers should ensure that there is no delay in sending or emailing statements and the customer has a sufficient number of days (at least one fortnight) for making payment before the interest starts getting charged.
  3. No wrong bills: Card issuers should ensure that wrong bills are not raised and issued to cardholders. In case, a cardholder protests any bill, the card issuer should provide an explanation and, wherever applicable, documentary evidence shall be provided to the cardholder within a maximum period of 30 days from the date of complaint.
  4. No charges on disputed transactions: No charges should be levied on transactions disputed as ‘fraud’ by the cardholder until the dispute is resolved.
  5. Refunds before the due date should be accounted as payment:  Any credit amount arising out of refund, failed or reversed transactions before the due date of payment, should be immediately adjusted against the payment due.
  6. Consent to adjust high credit amounts: Card issuers should seek the explicit consent of the cardholder to adjust credit amount beyond a cut-off, one percent of the credit limit or ₹5000, whichever is lower, arising out of refunds or reversed transactions for which payment has already been made by the cardholder. Cardholders can make a request to the card issuer for reversal of the credit amount outstanding in the card account into their bank account.

Reporting to Credit Information Companies

  1. Customer should be explicitly notified: For providing information relating to credit history or repayment record of the cardholder to a Credit Information Company, the card-issuer should explicitly bring to the notice of the customer that such information is being provided in terms of the Credit Information Companies (Regulation) Act, 2005.
  2. Procedure to report defaults: Before reporting the default status of a credit cardholder to a Credit Information Company, the card issuers should ensure that they adhere to a procedure, duly approved by their Board, including issuing a seven day notice period to the cardholder. If the customer settles their dues after having been reported as a defaulter, the card-issuer should update the status within 30 days from the date of settlement. Card issuers should be particularly careful in the case of cards where there are pending disputes.
  3. No reporting info on inactive cards: No card issuer should report any credit information relating to a new credit card account to Credit Information Companies prior to activation of the card.
  4. Reporting past due accounts to CICs: Card issuers should report a credit card account as ‘past due’ to CICs or levy late payment charges and other related charges if only a credit card account remains ‘past due’ for more than three days.

Key guidelines around debit cards

  1. Only for savings or current account customers: Debit cards shall only be issued to customers having Savings Bank or Current Accounts. No bank should issue debit cards to cash credit or loan account holders. However, banks can link the overdraft facility provided along with Pradhan Mantri Jan Dhan Yojana accounts with a debit card.
  2. No forced issuance: Banks should not force a customer to avail debit card facility and shall not link issuance of a debit card to the availment of any other facility from the bank.
  3. Non-plastic debit cards such as wearables allowed: Scheduled Commercial Banks (other than RRBs) can issue other form factors in place of a plastic debit card such as wearables after obtaining explicit consent from the customer. But such other form factors will be subject to the same guidelines and there should be options for disabling or blocking the form factor through mobile banking, internet banking, SMS, IVR or any other mode. Banks should submit a detailed report to the Department of Regulation, Reserve Bank of India, prior to the issuance of any such form factors.

Key guidelines around co-branding arrangements

  1. No prior approval necessary: Prior approval of the RBI is not necessary for the issuance of co-branded debit cards or co-branded prepaid cards by banks and co-branded credit cards by card issuers. However, Urban Cooperative Banks (UCBs) shall not issue debit/credit cards in tie-up with other non-bank entities.
  2. Explicit mention of arrangement: The co-branded credit/debit card should explicitly indicate that the card has been issued under a co-branding arrangement. The co-branding partner should not advertise the co-branded card as its own product. The co-branded card shall prominently bear the branding of the card issuer. The information relating to revenue sharing between the card issuer and the co-branding partner entity should be indicated to the cardholder and also displayed on the website of the card issuer.
  3. Card-issuer liable for acts of co-branding partner: Card issuers are also liable for the acts of the co-branding partner. Card issuers should ensure that cash backs, discounts and other offers advertised by a co-branding partner are delivered to the cardholder on time. Card issuers will be liable for any delay or non-delivery of the same to the cardholders.
  4. The co-branded entity cannot have access to transaction information: The role of the co-branding partner entity is limited to marketing and distribution of the cards and providing access to the cardholder for the goods and services that are offered. The co-branding partner should not have access to information relating to transactions undertaken through the co-branded card.
  5. NBFCs and credit cards: NBFCs, which desire to enter into a co-branding arrangement for the issue of credit cards with a card issuer, should also be guided by the Guidelines on the issue of Co-Branded Credit Cards contained in the respective Master Directions applicable to NBFCs.

Key guidelines for both debit and credit cards

Grievance redressal

  1. Setting up a grievance redressal mechanism: Card issuers should put in place a Grievance Redressal Mechanism and give wide publicity about it. The name, direct contact number, email-id and postal address of the designated grievance redressal officer of the card issuer should be mentioned on the credit card bills and account statements. The designated officer shall ensure that the grievances of cardholders are redressed promptly without any delay and that customers can easily escalate grievances if necessary.
  2. Compensation: Card issuers should be liable to compensate the complainant for the fault of the card issuer and where the grievance has not been redressed in time. If a complainant does not get a satisfactory response from the card issuer within a maximum period of one month from the date of lodging the complaint, the complainant can approach the Office of the concerned RBI Ombudsman for redressal.

Confidentiality of customer information

  1. No revealing of information to third-party without consent: Card issuers should not reveal any information relating to customers obtained at the time of opening the account or issuing the card to any other person or organization without obtaining their explicit consent, with regard to the purpose for which the information will be used and the organizations with whom the information will be shared.
  2. Full disclosure of implications of data sharing: In cases where the customers give explicit consent, card-issuers should explicitly state and explain clearly to the customer the full meaning and implications of the disclosure clause. The information sought from customers shall not be of such nature it will violate the provisions of law relating to the maintenance of secrecy in the transactions. The card-issuers shall be solely responsible for the correctness or otherwise of the data provided for the purpose.

Terms and conditions for issue of cards to customers

  1. Clear and simple language:  The terms and conditions for the issue and usage of a card should be mentioned in clear and simple language (preferably in English, Hindi and the local language) comprehensible to the cardholder.
  2. Charges not explicitly indicated should not be levied: Card issuers should not levy any charge that was not explicitly indicated to the cardholder at the time of issue of the card and without getting his/her explicit consent. For convenience fees, the same should be indicated to the cardholder in a transparent manner, prior to the transaction. However, the exception to this is service taxes which may subsequently be levied by the Government or any other statutory authority.
  3. Compensation for late reversal:  The terms should clearly specify the time period for reversal of unsuccessful/failed transactions and the compensation payable for failure to meet the specified timeline.
  4. Changes to terms must be notified: The terms may be altered by the card issuer, but 30 days’ notice of the change should be given to the cardholder in all means of communication to enable them to withdraw if they so choose. After the notice period of 30 days, the cardholder would be deemed to have accepted the terms.

Other General Conditions

  1. Consent before renewal: No card-issuer should dispatch a card to a customer unsolicited, except in the case where the card is a replacement/renewal. Further, the card issuer should obtain the explicit consent of the cardholder prior to the renewal of an existing card or prior to reissuing a blocked card.
  2. Transparency of benefits:  Any discounts, cashback, reward points, loyalty points or any other benefits offered by the card issuer should be provided in a transparent manner including the source of such benefits.

Which guidelines have been repealed?

The following 19 guidelines will be repealed after July 1:

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