The Reserve Bank of India on April 21, 2022, asked card companies not to issue unsolicited credit cards or upgrade existing cards without the explicit consent of the customer, failing which they would be liable to pay double the amount billed as a penalty.
In its Master Directions on Issuance of Credit Cards and Debit Cards, RBI stated “Issue of unsolicited cards/up-gradation is strictly prohibited”. These instructions will be effective from July 1, 2022.
RBI further states that if an unsolicited card is issued or the existing card is upgraded and activated without the express consent of the recipient, the card issuer will have to refund the fee and pay a penalty twice the amount of the bill.
As per the master instructions, commercial banks with a net worth of more than Rs 100 crore can carry on credit card business either independently or in tie-up arrangements with other card-issuing banks/ NBFCs. Regional Rural Banks (RRBs) are also permitted to issue credit cards in collaboration with their sponsor bank or other banks.
“In addition, the person in whose name the card is issued can also approach the RBI Ombudsman who would determine the amount of compensation payable by the card-issuer to the recipient of the unsolicited card as per the provisions of the Ombudsman Scheme, for loss of complainant’s time, expenses incurred, harassment and mental anguish suffered by him/her,” the central bank said.
RBI further said that non-banking financial companies (NBFCs) shall not carry on the business of credit cards without its prior approval. “Without prior approval from the Reserve Bank, NBFCs shall not issue debit cards, credit cards, charge cards, or similar products virtually or physically.”
With regard to the recovery of dues from customers, RBI has asked issuers to ensure that they and their agents adhere to the Fair Practices Code for Lenders. In particular, with regard to the appointment of third party agencies for debt collection, card issuers shall ensure that their agents avoid actions that may harm their integrity and reputation and adhere to strict customer confidentiality.
With regard to the issuance of debit cards, RBI said, “The co-branding partner shall not advertise/market co-branded cards as their product. In all marketing/advertising material, the name of the card issuer shall be clearly shown.” NBFCs desirous of setting up co-branding arrangements for the issuance of credit cards will also come under the guidelines.
Among other things, the RBI asked the card issuers to set up a grievance redressal mechanism and publicize it widely. Card issuers shall ensure that their call center staff are adequately trained, to efficiently handle and escalate complaints if required.
“If the complainant does not receive a satisfactory response from the card issuer within a maximum period of one month from the date of lodging the complaint, he/she shall have the option to approach the office of the concerned RBI Ombudsman for redressal of grievances,” it added.
