RBI Guidelines for Credit Card Companies & Banks
Regulatory Guidelines for Credit Card Issuers
Good news for credit card users in India with the RBI (Reserve Bank of India) issuing regulatory guidelines for credit card issuers and Banks on Nov 21, 2005. As has been demanded by customers for over a decade now to protect their rights as consumers, finally has been addressed by the governing banking institution. RBI has issued clear guidelines on fine print, quoting of interest rates, APRs, annual fee and other charges. Another important addition is the guidelines and Code of Conduct for use of DSAs, DMAs and other agents appointed by credit card companies for marketing and debt collection.
Group has suggested various regulatory measures aimed at encouraging growth of credit cards in a safe, secure and efficient manner as well as to ensure that the rules, regulations, standards and practices of the card issuing banks are in alignment with the best customer practices...
...All the credit card issuing banks / NBFCs should implement these guidelines immediately.
Credit card companies now have to give the customer a minimum of one fortnight for making the payment before interest gets charged to them. There a number of points on the levy of charges, indication of fees involved, method of calculation of interest rates, late payment charges. With the new guidelines banks will have to quote separately the APR for retail purchases and cash advance with some examples so that customers have better comprehension of what they are paying for. Quoting some points from the new regulations -
Card issuers should quote annualized percentage rates (APR) on card products (separately for retail purchase and for cash advance, if different). The method of calculation of APR should be given with a couple of examples for better comprehension. The APR charged and the annual fee should be shown with equal prominence. The late payment charges, including the method of calculation of such charges and the number of days, should be prominently indicated. The manner in which the outstanding unpaid amount will be included for calculation of interest should also be specifically shown with prominence in all monthly statements. Even where the minimum amount indicated to keep the card valid has been paid, it should be indicated in bold letters that the interest will be charged on the amount due after the due date of payment. These aspects may be shown in the Welcome Kit in addition to being shown in the monthly statement.
And,
Changes in charges (other than interest) may be made only with prospective effect giving notice of at least one month. If a credit card holder desires to surrender his credit card on account of any change in credit card charges to his disadvantage, he may be permitted to do so without the bank levying any extra charge for such closure.
Protection of Rights of Credit Card Customers
The broad recommendations made by the RBI for Credit Card Operations of banks are
- Issuing of cards Interest rates, fees and other charges
- Wrongful billing
- Use of DSAs / DMAs and other agents
- Protection of Customer Rights
- Right to privacy
- Customer confidentiality
- Fair Practices in debt collection
- Redressal of Grievances
- Internal control and monitoring systems
- Right to impose penalty
The Reserve Bank of India reserves the right to impose any penalty on a bank / NBFC under the provisions of the Banking Regulation Act, 1949 for violation of any of these guidelines.
Advantage - Credit Card Users
More power to customers and the RBI, with the credit card market booming in India these regulations will add transparency, privacy, safety and a redressal system for customers. Get more information here.
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