The Reserve Bank of India has issued master directions for credit and debit card issuance in the year 2022. These fresh guidelines will come into effect from July 1, 2022. The guidelines apply to banks excluding payment banks, state co-operative banks, and district central co-operative banks. Also, all NBFCs operating in India should follow the new norms of card issuance.
“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 & cybersecurity-related directions applicable to credit, debit, and co-branded cards, as issued by the Reserve Bank,” the notification said.
As per the new directions, Card-issuers shall provide a one-page Key Fact Statement along with the credit card application containing the important aspects of the card such as rate of interest, and quantum of charges, among others. In case of rejection of a credit card application, the card issuer shall convey in writing the specific reason/s which led to the rejection of the application. The most important terms and conditions (MTC) for issuance shall be highlighted and published/sent separately to the customers, at the acceptance stage (welcome kit), and in important subsequent communications. The MITC contains fees and Charges, annual membership fee, cash advance fee, service charges levied on transactions, Interest-free (grace) period – illustrated with examples, Overdue interest charges – to be given on a monthly & annualised basis, Credit limit- Available credit limit- Cash withdrawal limit, etc. shall be printed with the font size of minimum Arial-12. The MITC shall be provided to the customer at the time of onboarding and each time, a condition is modified with notice to the customer. The MITC and copy of the agreement signed between the card-issuer and cardholder shall be sent to the registered email address of the cardholder or postal address as per the choice of the customer. In cases where the card-issuers are offering any insurance cover to their cardholders, in tie-up with insurance companies, the card-issuers shall obtain explicit consent in writing or in digital mode from the cardholders along with the details of nominee/s. 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. 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 the date of seeking confirmation from the customer. In case of a renewed or replaced card, the closure of an inactivated card shall be subject to payment of all dues by the cardholder. The consent for the cards issued or the other products/services offered along with the card shall be explicit and shall not be implied. In other words, the written consent of the applicant shall be required before issuing a credit card. Alternatively, card-issuers may use other digital modes with multifactor authentication to obtain explicit customer consent. However, such alternative digital modes, if any used by the card-issuer, shall be communicated to the Department of Regulation, Reserve Bank of India.
Among the underwriting standards, card issuers are required to ensure complete transparency in the conversion of credit card transactions to Equated Monthly Installments (EMIs) by clearly indicating the principal, interest, and upfront discount provided by the merchant/card-issuer (to make it no cost), before the conversion. The same shall also be separately indicated in the credit card bill/statement. EMI conversion with an interest component shall not be camouflaged as zero-interest/no-cost EMI.
Issue of unsolicited facilities:
Unsolicited loans or other credit facilities shall not be offered to the credit cardholders without seeking explicit consent. In case an unsolicited credit facility is extended without the written/explicit consent of the cardholder and the latter objects to the same, the card issuer shall not only withdraw the facility but also be liable to pay such penalty as may be considered appropriate by the RBI Ombudsman, if approached. Card issuers shall not unilaterally upgrade credit cards and enhance credit limits. Explicit consent of the cardholder shall invariably be taken whenever there is/are any change/s in terms and conditions. In case of a reduction in the credit limit, the card issuer shall intimate the same to the cardholder. However, the issuance of a credit card for renewal or replacement shall not be treated as an unsolicited card.
Assessment of Credit limits:
Card issuers shall ensure prudence while issuing credit cards and independently assess the credit risk while issuing cards to persons, taking into account the independent financial means of applicants as per Board-approved policy. As holding several credit cards enhances the total credit available to any consumer, card issuers shall assess the credit limit for a credit card customer taking into consideration all the limits enjoyed by the cardholder from other entities on the basis of self-declaration/credit information obtained from a Credit Information.
Add-on and corporate credit cards:
The add-on cards shall be issued only to the persons specifically identified by the principal cardholder under both personal and business credit card categories. Add-on cards shall be issued with a clear understanding that the liability will be that of the principal cardholder. Similarly, while issuing corporate credit cards, the responsibilities and liabilities of the corporate and its employees shall be clearly specified. The liability of the corporate/business entity shall form part of its assessed credits.
Fraudulent transactions:
No charges shall be levied on transactions disputed as ‘fraud’ by the cardholder until the dispute is resolved.
Refund of failed transactions;
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.
Billing cycle:
In order to provide flexibility in this regard, cardholders shall be provided a one-time option to modify the billing cycle of the credit card as per their convenience.
Closure of Credit Card:
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 by the card issuer 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. If credit balances are available in the credit card account same shall be credited to the card holder’s bank account. 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. Further, 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 the credit card, the cardholder shall be immediately notified about the closure through email, SMS, etc. Cardholders shall be provided the option to submit a request for closure of a credit card account through multiple channels such as the 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 Rs.500 per day of delay payable to the customer, till the closure of the account provided there is no outstanding in the account.
Reporting to credit information Companies:
Credit card issuers should not 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, RBI said. ‘Under no circumstances it shall take more than 30 days from the effective date of the above directions’ said RBI.
Engagement of telemarketers:
The telemarketers engaged by Card-issuers shall comply with directions/regulations on the subject issued by the Telecom Regulatory Authority of India (TRAI) from time to time while adhering to guidelines issued in “Unsolicited Commercial Communications – National Customer Preference Register (NCPR)”. The card issuer’s representatives shall contact the customers only between 10:00 hrs and 19:00 hrs. Further, the decision-making power for the issue of credit cards to a customer shall remain only with the card issuer, and the role of the Direct Sales Agent (DSA)/Direct Marketing Agent (DMA)/other agents shall remain limited to soliciting/servicing the customer/ account.
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