RBI releases new credit card rules: Top things you need to know
RBI has released a new set of rules for debit and credit cards. The new governing rules are going to be effective from July 2022 and will be applicable to
- all Scheduled Banks (except State Co-operative Banks, District Central Cooperative Banks, and Payments Banks) and,
- Non-Banking Financial Companies (NBFCs) in the country.
Summary in Brief
The apex bank of the country issued a statement to the media saying, "These directions cover the general and conduct regulations relating to credit, debit and co-branded cards which shall be read along with prudential, payment and technology & cyber security related directions applicable to credit, debit and co-branded cards, as issued by the Reserve Bank"
The new rules are oriented toward enhancing customers’ experience through several means. If you have been one such customer who was issued a credit card without any application or was charged extra for a card up-gradation that you never requested or approved, the new RBI rules are a must-read!
Important Highlights of RBI’s new Debit and Credit Card Rules
Penalty for issuing/upgrading credit cards without explicit approval
- Banks are prohibited from issuing unsolicited credit cards or upgrading any user’s existing credit cards without their explicit consent or permission. In case any such unauthorized issuance or upgradation of credit cards, the issuer, without demur, will be liable to pay double the billed amount as a penalty. The person to whom an unauthorized credit card has been issued can also approach the RBI’s ombudsman who will finalize the amount of penalty the card issuer will have to pay as compensation to the person as per the provisions given under the Ombudsman Scheme.
- The consent taken from the customer shall be explicit and not implied. It means that the credit card issuer will have to take a valid approval from the person in the form of a signed application form or any type of digital authorization before issuing credit cards or any related product/services under the person’s name. In case the approval is taken through digital means, it should be informed to the RBI’s Department of Regulation.
Issuer responsible for misuse of unsolicited credit cards in transit
In case any unsolicited credit card is misused in transit, i.e.; before reaching the person under whose name the card has been issued, the issuer of the credit card will be held responsible. This means that the person under whose name the credit card was issued will not be liable to pay or held responsible for anything done with the card.
Consent through OTP should be taken if the customer fails to activate the card within 30 days
The credit card issuer should take consent through OTP to activate the credit card in case the customer fails to do the same within 30 days of the issuance of the card. If the customer further fails to offer any consent, the card issuer should close the credit card account without charging anything from the customer and within 7 days of seeking consent from the customer. In case a new card has been issued in replacement of an existing card, all the dues of the existing card have to be cleared during its inactivation.
Explicit consent needed to sell any insurance cover with the issued credit card
The credit card issuers can attach an insurance cover as an add-on insurance option for the issued credit card that will cover the liabilities arising due to the loss/theft of the card or in case of any fraud. Such insurance covers can be offered in partnership with any insurance company. Above all, explicit consent shall be taken from the person under whose name the card has been issued.
Mandatory to provide Key Facts Statement along with the credit card application
The credit card issuer also needs to provide an one-page Key Facts Statement to the customer, along with the credit card application. The statement shall include important and relevant details of the card such as charges, interest rate, penalties, and more.
Compulsory to offer an explanation for the rejection of credit card application
The company issuing the credit card has to provide the customer with an explanation for rejecting the credit card application. The application should be detailed with specific reason(s) on why the issuer cannot approve the requested credit card.
MITC should be sent separately
The credit card issuing institution should send the Most Important Terms and Conditions (MITC) separately to the customer at all the important stages of the credit card application process such as while sending the Welcome Kit and during important communications. It should also be provided during onboarding and any condition can only be modified with proper notice to the customer.
Specific calling hours for telemarketing
Credit card companies should make sure that any telemarketing activities shall not be done before and after 10 A.M and 7 P.M. They should comply completely with all the directions/regulations issued by the Telecom Regulatory Authority of India (TRAI) every time.
No to harassment!
RBI new credit card rules strictly prohibit any harassment or intimidation by credit card issuers or any third party agent for recovery of the due from the customers. RBI new card rules also mention that the card issuing agencies should adhere to fair practices during recovery. In case a third party recovery agency is working with the card issuer, it should be ensured that there should not be any practice that could harm or damage the image or reputation of both the companies. Confidentiality of customer information should also be maintained strictly.
Who can issue credit cards?
- Commercial banks with a net worth of more than Rs 100 crores can issue credit cards either independently or in partnership with any other card issuing bank or NBFC.
- RBI new credit card rules also allow Regional rural banks (RRBs) to issue credit cards in a tie-up with any other bank.
- NBFCs need to take prior approval before starting any credit card business.
Complete transparency during EMI conversions and with APRs
- The RBI also mandates credit card issuers to maintain complete transparency in the conversion of any credit card to EMI. Important details such as principal amount, interest charged, and upfront discount should be mentioned to the customer prior to EMI conversion and in monthly bills. Also, EMI conversions that include an interest element should not be shown as non-cost or zero-cost EMIs.
- The card issuer should also mention Annualized Percentage Rates (APR) applied on credit cards under different conditions. There should not be any hidden charges with free-of-charge credit cards.
- What will happen if the credit card company increases my card’s credit limit without my consent?
As per RBI new credit card guidelines/rules, a credit card issuer cannot increase a credit card’s limit without the consent of the cardholder. In case this happens, the card issuer will have to bear complete responsibility for the incident.
- How many days will it take to close a credit card as per RBI new credit card rules?
The RBI new credit card rules clearly mention that the credit card issuer should acknowledge and honour a credit card closure request within seven days of the request being raised. Post closure of the credit card account, the cardholder should be notified of the same through email, SMS, and other means.
- I have not used my credit card for more than a year, will it get closed automatically?
In case the credit card has been inactive or unused for a year, the credit card issuer will have to intimidate the cardholder to start the credit card account closing process. If no reply is received by the cardholder within 30 days of intimidation, the card issuer can close the account, subject to clearing of all the dues.