RBI issues stringent credit card guidelines to protect customers

New credit card guidelines from RBI
RBI’s fresh credit card guidelines for issuers contain several provisions that protect and empower cardholders.

New credit card guidelines: The Reserve Bank of India has issued fresh guidelines for issuing and closing credit cards. The new rules under the Reserve Bank of India (Credit Card and Debit Card – Issuance and Conduct) Directions, 2022 will be effective from July 1. The guidelines covering credit cards will be binding on all scheduled banks excluding payment banks and co-operative banks as well as all non-banking financial companies, said an RBI release issued last week.

Addressing the issue of banks dragging their feet on closing credit card accounts, the RBI brought in a number of directions. The new rules mandate that a request for closure of a credit card must be honoured within seven working days by the credit card issuer, pending payment of dues by the cardholder. The issuer must notify the cardholder about the action via email and SMS.

Also, the cardholders will get multiple options in modes of submitting a request for closure of credit cards including helplines, dedicated e-mail ids, a link on the website, internet banking and a mobile app. Card issuers failing to meet the seven-day deadline for closure will face a Rs 500 per day penalty payable to the cardholder, the RBI release said.

READ I  Why RBI should keep interest rates, monetary policy stance unchanged

Credit card guidelines impact

In the case of cards unused for more than a year, the issuer may close the card account after initiating the cardholder. If there is no word from the cardholder within 30 days, the card account shall be closed subject to payment of dues. Information about the closure must be updated with credit information companies within 30 days, the new rules stipulate.

The rules also ban the issuing of unsolicited credit cards or the upgrading of an existing card without the customers’ consent. If the cardholder is charged on unsolicited cards, the issuer will withdraw these charges and pay a penalty that is twice the value of the charges reversed. In such cases, the consumer can approach the RBI ombudsman who would fix the compensation payable by the issuer.

The card issuers will share a key fact statement along with the application form that will clearly state the rate of interest and other charges that will be levied on the customers. The issuing companies will state specific reasons for rejecting a credit card application. Credit card issuers may introduce an option for insurance cover for liabilities from lost cards and frauds. If the issuers are offering an insurance cover, it should be done after obtaining the consent of the cardholders.

The new guidelines mandate issuers to seek the cardholder’s consent for activating a card using a one-time-password, if the customer has not activated it within 30 days from the date of issue. If they do not receive the cardholder’s consent within this period, the credit card account should be closed within seven working days without charging the customer.

The credit card issuers cannot report credit information relating to new accounts to credit information companies before activation of the card. If any such information is passed on, the card issuers must withdraw it immediately.