Credit cards: Banks flout guidelines

 Ever wondered how long it would take to clear the Rs 50,000 outstanding on your credit card? Probably, no one, other than your credit card company, knows the answer.

It’s a different matter that the credit card issuer — despite being told by the Reserve Bank of India as recently as last month — is unwilling to disclose the information, leading to many card holders falling in a debt trap due to high interest rates, which range between 20% and 42%.

“There have been instances of credit card users having to take a personal loan from us to clear credit card dues,” says a PSU bank executive.

But that’s not the only norm that is being flouted by most banks and non-banking finance companies issuing credit cards. Even the annualised interest rate is to be communicated clearly to card holders but it is usually buried in the small print on the reverse side of your monthly bill. But banks blame cardholders for not reading the bill carefully.

RBI guidelines, issued on July 2, has also mandated that banks illustrate in the monthly statement how they levy interest rates. But there are very few credit card issuers who follow the norms.

In any case most banks illustrate the minimum amount due more prominently than the total outstanding, leaving credit cardholders to hunt for the latter number. This is despite the fact that the RBI guidelines stipulate that the statement must clearly warn the customer of the long-term consequences of paying only the minimum amount due.

But one must credit banks — especially the private players — for being aggressive in doling out cards and letting people splurge. It’s a different matter that the central bank has mandated that they carefully calculate the paying capacity of cardholders and follow “know-your-customer” norms.

Chances are that one card opens the door for many more cards, of which many would have come without even filling up a form, leave alone submitting documents establishing your identity and verifying your address.

Recognising your right to privacy, RBI norms bar banks from not just issuing unsolicited cards, but also doling out unsolicited loans or credit facilities.

But bank call centres seem completely unaware, if not ignorant, of the norms since it is almost always your credit card that entitles you to more facilities from banks. While banks have so far not refrained from acting against the RBI’s annual master circular on credit cards, even the regulator has done little on its own.

Banking sources say that on most occasions RBI is unable to act against banks since consumers have not stuck to their part of the deal. For instance, the rules allow you to bar calls by enrolling individually with every bank’s do-not call (DNC) register, which most people do not do.

What if you continue to receive calls even after registering? You need to approach a grievance redressal officer who has to address your concerns within a stipulated period.