RBI panel moots ombudsman for credit card cases

Credit card customers — used to getting fleeced by banks — can breathe easy. A RBI appointed working group on regulatory mechanism...

Credit card customers — used to getting fleeced by banks — can breathe easy. A RBI appointed working group on regulatory mechanism for cards has recommended that a banking ombudsman will be the appropriate authority to arbitrate in disputes between card holders and issuing banks.

Credit card companies, which are charging a hefty 36 per cent interest per annum, are blamed for inflated bills, sending goons to recover dues and harassment of customers and their family members. A Mumbai High Court judge was hearing a petition on recovery agents which has asked both the RBI and Indian

Banks’ Association to respond.

The RBI also called for payment of compensation to the recipient of unsolicited cards amounting to twice the value of the billed amount in case the card is activated by the issuing bank. While asking issuing banks to eschew issuing unsolicited cards to non- customers, the group said, as a consumer rights protection measure (taking into account difficulties faced by the card holder’s family in paying off outstanding dues in case his death), issuing banks should offer all their card holders a group insurance policy to cover their payables.

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In case of the death of a card holder, the card payables, to the extent of the cover, would be paid off by the insurance company. The premium for this insurance cover would be paid by the card holder.

As there are rising number of complaints regarding receipt of unsolicited cards, the group observed that ‘‘in case an unsolicited card is activated by the issuing bank without the approval of the recipient and the latter is billed for the same, the issuing bank will not only immediately reverse the charges, but will pay a penalty without demur to the recipient of the card amounting to twice the value of the reversed charges.’’

The proposal to penalise errant card companies comes as it has been observed that without securing the approval of the person concerned and without communicating the terms and conditions of the product, cards are being activated and the customer billed.

The group felt that the ombudsman, who looks into issues relating to deficiencies in service in the banking sector and also attending to customer service issues, would be the appropriate authority to arbitrate in credit card disputes between card holders and card-issuing banks. At present, in case a card holder has a dispute with a card issuing bank which cannot be addressed, the recourse for him or her is either to approach the consumer or civil court. This recourse is expensive and time-consuming.

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Noting that recently there have been increasing complaints regarding people being disturbed, often at odd hours, by persistent calls from direct sales agents and from banks’ call centres, the group said, all card-issuing banks should maintain a ‘do not call registry’ which will have the phone numbers of customers as well as non-customers who have informed banks that they do not wish to get unsolicited calls.