RBI steps in to tame the card sharks

What is the problem?
Problems are at two levels. One is the operational problem of the interface with a large bank. You may have a problem and the call centre operator is unable to help. Says Mullerpattan: “I don’t think there is any deliberate attempt to cheat by the banks, it is the lack of financial education of the call centre employees that is the problem. But the credit cards business is where the motives could be suspect”.

The second level is with unsolicited products like credit cards, loans and insurance that are sent, activated and billed. Says a Bangalore-based director of a software company: “A foreign bank tried to sell me insurance over the telephone and refused to send any written communication about rates and conditions. Had I said yes over the telephone, they would have charged my card and issued a policy. And how is one to dispute if someone has said yes or no over the telephone?”

What this software professional and most other customers may not know is that most banks record these conversations. Says Sarvesh Sarup, Country Business Manager, Global Consumer Group, Citibank: “We do disclose recording in our terms and conditions”. But these terms and conditions are never spelt out on the phone and may be buried in fine print in the product literature when it arrives. None of the people we spoke to for this story had ever been told that their conversations were being recorded.

Why they have got away with it
Globally, the financial sector needs a strong regulator and is responsive to consumer activism. Recently the Financial Services Agency (FSA) in Japan, has ordered Citigroup’s Japanese trust banking unit to halt all new operations as of May 2, 2005, accusing the bank of misleading inspectors with misinformation and violating accounting rules. Clearly, the Indian regulator needs to give strong signals to the financial sector that malpractices will not be tolerated. Steps in that direction have begun already with RBI putting in place guidelines for credit card companies in the Credit Policy announced last week.

What RBI proposes to do
The main features of the Report of the Working Group on Regulatory Mechanism for Cards are:

Problem: Information given to customers is in legal terminology that is not easily understood
Recommendation: The terms and conditions for card issue and usage should be clear, in simple language, comprehensible to a layman, prominently displayed, easily readable and crucial items highlighted. The main features to be brought upfront.

Problem: Lack of transparency while marketing products, distorting the terms and conditions to play up the good and hide the bad
Recommendation: Code of conduct for direct sales agents and penalty for firms that violate this code, termination of contracts for serious violations.

Problem: Privacy violation
Recommendation: Card companies to obtain specific approval of the card holder to disclose information, they will ensure that the DSAs do not misuse customer information

Problem: Telemarketing without consent
Recommendation: Do Not Call registry to be maintained by all card issuing banks, Indian Banks Association to set up a web site to register their phone numbers in the Do Not Disturb (DND) list.

Problem: Unsolicited credit cards
Recommendation: If a person is billed for an unsolicited card, the billing charges are reversed and a penalty of twice the amount billed is paid to the individual.