The Reserve Bank of India, the central bank of the country, which oversees all sorts of banking operations in the country, last evening, announced a new overarching “Master Direction” governing banks or other entities which issue credit cards in India about how to deal with customers. I gave a full read to the document this morning, and there are some very interesting snippets that are, overall pro-consumer. While there is a lot to digest, and I am not sure if I got it all right, here are some of the details that stood out for me.
RBI’s Master Direction insists on Consent for Credit Card actions
One of the first things that stood out, is that credit cards cannot be issued or upgraded unsolicited. The document reads,
The issue of unsolicited cards/upgradation is strictly prohibited. In case, an unsolicited card is issued/existing card upgraded and activated without the explicit consent of the recipient and the latter is billed for the same, the card-issuer 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.
Not just that, even activating your credit card will need express consent from the cardholder if you have not activated the card within 30 days after issuance. The document reads,
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.
New credit card accounts, if not activated will not be reported to the credit bureau
Let’s say you decided to apply for a card, and then not use it. Your card stays inactive. Now, the card issuer is prohibited from reporting your credit line and other details to the Credit Bureaus. The document reads:
vii. No card-issuer shall report any credit information relating to a new credit card account to Credit Information Companies prior to activation of the card. Any credit information relating to such inactivated credit cards already reported to Credit Information Companies shall be withdrawn immediately; under no circumstances it shall take more than 30 days from the effective date of these directions.
Again, in line with the consent clause earlier, if a card is not activated, and the consent is not received for activating it, the card can be closed without any cost to the customer. And since it is not reported to the credit bureau, it will not hurting your score as well.
If no consent is received for activating the card, card-issuers shall close the credit card account without any cost to the customer within seven working days from date of seeking confirmation from the customer.
Credit Card Closures will have to be completed within 7 working days
I am not sure if there was earlier, a timeline to close credit card accounts or not, but now there sure is one. RBI states that credit card issuers will now on, have to ensure that they close the card within seven working days after the request for closure is received, and all dues have been paid. Not just that, the card issuers have to now create multiple channels to receive requests, such as email, website etc., and not insist on receiving a hard copy which may delay the process.
Here is the text from the RBI notification,
(a) Any request for closure of a credit card shall 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 shall be provided option to submit request for closure of credit card account through multiple channels such as 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 shall result in a penalty of ₹500 per day of delay payable to the customer, till the closure of the account provided there is no outstanding in the account.
Will this cause a change at HDFC Bank? It needs to.
If a Credit Card is not used for a year, it will be closed
This one is pro-customers, although it might be slightly against the clan who keep extra credit cards for encashing on certain offers. RBI has now mandated, that if a card is not used for more than one year, the process to close the card shall be initiated by the card issuer after they intimate the card members and wait for thirty days (as long as the account is clear).
Anyhow, this is the text from RBI about the account closures,
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.
I’m keen to see how this works personally since I have a couple of cards in the sock drawer which have not been used, in, forever. I’ll be waiting for those emails, HSBC and Axis Bank.
Once a Credit Card is closed, any credit balance will have to be transferred to the cardholder
Another pro-consumer move, which was not written up before I believe. The RBI has mandated that any leftover credit balances, will go back to the customer. If they don’t have the bank account details of the customer, they will have to reach out to the customer to ask for them. In RBI’s words,
Subsequent to closure of credit card account, any credit balance available in credit card accounts shall be transferred to the cardholder’s bank account. Card-issuers shall obtain the details of the cardholder’s bank account, if the same is not available with them.
Cardmembers get a one-time option to modify the billing cycle
Card issuers do not follow a standard billing cycle for all credit cards issued. In order to provide flexibility in this regard, cardholders shall be provided with a one-time option to modify the billing cycle of the credit card as per their convenience.
Fraud transactions need to be set aside
When a fraud transaction is contested, no charges are to be levied on transactions disputed as fraud by the cardholder, until the dispute is resolved. This is going to be an interesting one, and I will be testing this personally since a disputed transaction of mine last year with IndusInd Bank Credit Cards was still charged in full after it was called out.
Refunded/failed transactions do not have to be paid for
This was a slippery slope on many banks, and no guidelines were in place for a long time. So, while some banks would use the appropriate offsets, others would insist you still pay for the transactions which were voided or refunded and you could not offset them against your payment due. Now RBI insists that any refunds that come in, or reversals, will have to be adjusted. Here are the RBI’s words
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.
I’m sure there is more to the directions compared to what I could cull out of it the first time around. If you think there are any important clauses, do kickstart a discussion in the comments section below. Here is a link to the RBI website, again.
I haven’t gone over the debit card customer guidelines, but when I do, will make a post on that as well.
What do you think of the new RBI Guidelines for Credit Card customers?
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