RBI urges card companies not to issue unsolicited credit cards and warns of penalty

It also called on card issuers and third-party agents not to use intimidation or harassment when collecting dues from customers.

The Reserve Bank on Thursday instructed card companies not to issue unsolicited credit cards or upgrade an existing card without the customer’s explicit consent or they will have to pay double the amount charged as penalty. It also called on card issuers and third-party agents not to use intimidation or harassment when collecting dues from customers.

In its Principal Instructions on the Issuance of Credit and Debit Cards, the RBI has stated that “the issuance of unsolicited cards/upgrades is strictly prohibited”. These instructions will come into force on July 1, 2022.

He further stated that in the event of an unsolicited card being issued or an existing card being upgraded and activated without the express consent of the recipient, the card issuer will be required to waive the fees and pay a penalty double the amount invoiced.

According to the main instructions, commercial banks with a net worth above Rs 100 crore can undertake credit card business either independently or in agreement with other card issuing banks/NBFCs.

Regional Rural Banks (RRBs) are also allowed to issue credit cards in conjunction with their sponsor bank or other banks.

“In addition, the person in whose name the card is issued may also apply to the RBI Ombudsman who would determine the amount of compensation payable by the card issuer to the recipient of the unsolicited card in accordance with the provisions of the scheme. mediation, in case of loss of the plaintiff’s time, expenses incurred, harassment and mental anguish he suffered,” the central bank said.

The RBI has further stated that Non-Banking Financial Companies (NBFCs) must not engage in credit card business without its prior approval.

“Without obtaining prior Reserve Bank approval, NBFCs shall not issue debit, credit, charge or similar products virtually or physically.”

Regarding the collection of dues from customers, the RBI has asked issuers to ensure that they and their agents adhere to the code of fair practice for lenders.

In particular, with regard to the appointment of third-party debt collection agencies, card issuers must ensure that their agents refrain from actions likely to harm their integrity and reputation and respect a strict client confidentiality, he added.

“Card issuers/their agents shall not use intimidation or harassment of any kind, verbal or physical, against any person in their debt collection efforts, including acts intended to publicly humiliate or to intrude on the privacy of family members of credit card holders, arbitrators and friends, making threatening and anonymous calls or making false and misleading statements,” he said.

Regarding the issuance of debit cards, RBI said banks should not force a customer to use the debit card service and should not tie the issuance of a debit card to usage. any other bank service.

Additionally, the apex bank said that a co-branded credit/debit card must explicitly state that it was issued under a co-branded agreement.

“The co-branded partner must not advertise/market the co-branded card as its own product. In all marketing/advertising materials, the name of the card issuer must be clearly stated,” it said. -he declares.

NBFCs wishing to enter into a co-branding agreement for the issuance of credit cards will also be subject to the guidelines.

Among other things, the RBI has asked card issuers to put in place a grievance mechanism and publicize it widely.

Card issuers should ensure that their call center staff are adequately trained to competently handle and escalate a complaint, if necessary, he added.

Furthermore, he stated that the card issuers will be required to compensate the plaintiff for the loss of his time, his expenses, his financial loss as well as for the harassment and mental anguish suffered for the fault of the issuer of the card and when the grievance has not been rectified in time.

“If a complainant does not receive a satisfactory response from the card issuer within a maximum period of one month from the date of filing the complaint, he will have the option of approaching the office of the relevant RBI Ombudsman for grievance redress,” he added.

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