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RBI moots self-regulatory body for card issuing banks

Our Bureau

Mumbai , April 25

A RESERVE Bank of India working group on regulatory mechanism for cards has recommended that card issuing banks should consider setting up a self regulatory body on the lines of Indian Banks' Association , Foreign Income Money Market and Derivatives Association and Foreign Exchange Dealers Association of India to take up issues of common interest affecting all card issuing banks.

RBI had set up the group in October 2004. The purpose of the group was to suggest the regulatory measures for growth of credit, debit and smart cards in a safe and secure manner; to draw a roadmap for setting up a grievances redressal mechanism for card users, to recommend measures to ensure that rules, regulations, standards and practices of card issuers are in agreement with best customer practices.

The group has submitted its report after discussing with card issuers such as Visa and Master and consumer rights activists. The group also studied card business in developed countries.

The group states in its report that some of the complaints received by RBI related to cards include unsolicited calls by banks or direct selling agents (DSAs), providing wrong or misleading information regarding amount of service charges or waiver of fees; sending cards to persons who have not applied, charging very high interest rates or service charges and use of physical coercion or harassment by recovery agents appointed by banks.

Part of the report also includes observations on the regulation of card payment schemes in other countries. In most countries, the credit industry is governed by consumer protection or fair trade practices regulations and or specific statutes relating to credit.

The central banks or banking regulations play only a secondary role, the report states.

The group has made several recommendations about transparency and disclosures, role of DSAs, procedure to be followed in case of tele-marketing and need to highlight the Most Important Terms and Conditions (MITC) of the product.

Some of the suggestions include:

  • Use simple language that is displayed prominently.

  • Include items such as fees and charges, drawal limits, billing cycle, default termination in the MITC.

  • Clearly mention annualised interest charges.

  • Adopt the India Banks Association's code of conduct with regard to DSAs.

  • Mention a "Do not call registry" which will have telephone numbers of customers and non-customer who have informed the bank that they do not wish to receive unsolicited calls.

  • Do not send unsolicited cards to non-customers

    The group also suggests a separate law to regulate card payment system.

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