RBI Tightens Credit Card Rules: Unsolicited Cards & Recovery Agents

RBI/2008-2009/100 DBOD.FSD.BC.23/24.01.011/2008-09 July  23 , 2008 All Scheduled Commercial Banks (excluding RRBs) Dear Sir Credit Card Operations of Banks Please refer to the Master Circular on Credit Card Operations of banks ( Circular No.DBOD.FSD.BC.6/24.01.011/2008-2009 ) dated July 1, 2008. 2. In this connection, we advise that the Reserve Bank of India had undertaken a study on the credit card operations of banks, based on the complaints received by the Bank as also by the Offices of the Banking Ombudsmen. The gist of the recommendations of the study together with existing RBI instructions, if any, and the action required to be taken by banks in this regard are given in the  Annex .Banks may ensure that action is taken by them as shown in column 4 of the  Annex .    The study report has also made certain recommendations relating to recovery of credit card dues through recovery agents in respect of which a separate circular has already been issued by the Bank ( DBOD.No.Leg.BC.75 /09.07.005/2007-08 dated April 24, 2008 ). 3.  Issue of Unsolicited Cards  Attention of banks is invited to paragraph 6.1 (a)  of the Master Circular on Credit Card Operations of banks dated July 1, 2008 wherein banks have been advised that unsolicited credit cards should not be issued and that in case an unsolicited card is issued and activated without the consent of the recipient and the latter is billed for the same, the card issuing bank shall not only reverse the charges forthwith, but also pay a penalty without demur to the recipient amounting to twice the value of the charges reversed. In addition, the person in whose name the card is issued can also approach the Banking Ombudsman who would determine the amount of compensation payable by the bank to the recipient of the unsolicited credit card as per the provisions of the Banking Ombudsman Scheme, 2006 i.e for loss of complainant’s time, expenses incurred, harassment and mental anguish suffered by him. Further, there have been instances where unsolicited credit cards issued have been misused before reaching the person in whose name the card is issued.  It is clarified that any loss arising out of misuse of such unsolicited cards will be the responsibility of the card issuing bank only and the person in whose name the card has been issued cannot be held responsible for the same as indicated at item (4) – Column (4) of the Annex.    4.  Insurance cover to credit card holders It has been decided that in cases where the banks are offering any insurance cover to their credit card holders, in tie-up with insurance companies, the banks may consider obtaining in writing from the credit card holder the details of nominee/s for the insurance cover in respect of accidental death and disablement benefits. Banks may ensure that the relevant nomination details are recorded by the Insurance Company. Banks may also consider issuing a letter to the credit card holder indicating the details regarding the name, address and telephone number of the Insurance Company which will handle the claims relating to the insurance cover.   5. Banks are advised to scrupulously adhere to these instructions and any violation/s would be viewed seriously.  Yours faithfully (P.Vijaya Bhaskar) Chief General Manager Annex Sl. No. 1.

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2008-2009/100 · issued 01 Jul 2008. The plain-English explanation above is BankPulse’s own independent summary.

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