Clean up your act, RBI tells credit card issuers

Lending a sympathetic ear to customers who are harassed by unsolicited calls from banks offering credit cards, RBI said if a bank issues a credit card to a customer without the customer's consent and also bills them when the customer uses the card, the bank and not the customer would face the music.

Of late, banks, in order to expand their loan portfolios, have been issuing unsolicited credit cards to their customers - both depositors and borrowers and soon thereafter, send bills riddled with joining fee, annual fee, card activation fee, insurance fee, etc. Non-payment or delay in payment draws penal interest, and the amount balloons further.

"The 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," RBI said, in the circular issued on July 23.

"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," RBI said.

Banks which issue "free of charge" or "lifetime free" credit cards to customers should also clearly specify clearly whether there are any "hidden charges" or conditions attached whenever they dole out the credit cards.

Noting that reports of misuse of credit cards before they reach the intended customers are on the rise, RBI said the card issuing bank and not the customer would be held responsible. "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," the apex bank said.

To protect customers from liability in respect of lost cards, RBI has proposed that banks take out group insurance covers that would provide protection against liabilities arising out of lost cards. However, the insurance covers should not be forced onto credit card holders and only those customers who are ready to bear the cost of the premium should be provided an appropriate insurance cover in respect of lost cards, the apex bank said.

For enhancing the protection of customers and reducing misuse of credit cards, RBI has also suggested banks to issue credit cards bearing scanned photograph, laminated signature or personal identification number of the customer.

In a separate development, the central bank has also mandated insurance companies that generally attach health insurance policies with the issued credit cards, saying they would now have to ask the beneficiaries in written, the proper details of nominee(s) for the insurance cover in respect of accidental death and disablement benefits and must also ensure that the relevant nomination details are recorded by the insurance company. Moreover, banks which have tied up with such insurance companies would also have to issue a letter to the credit card holder indicating the details regarding the name, address and telephone number of the insurance company, which would handle the claims relating to the insurance cover.