Unsolicited credit cards to attract penalty

Tightening its credit card regulations, the Reserve Bank of India (RBI) on Thursday issued a set of detailed norms on credit card transactions by banks. Cautioning banks against charging excessive rates, RBI said the interest rate and other charges on credit card dues fall within the purview of the RBI circular, which prohibits banks from charging excessive interest rates on personal loans and prescribes a rate ceiling on small advances.

Some banks levy interest charges that vary with the payment/default history of the cardholder. The issue needs transparent handling, RBI said.

The central bank said banks will also be penalised severely for issuing unsolicited credit cards to customers.

If such unsolicited cards are issued and activated without the consent of the recipient, with the latter being billed for the same, the card issuing bank shall reverse the charges and pay a penalty without demur to the recipient twice the value of the charges reversed.

?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 for loss of complainant?s time, expenses incurred, harassment and mental anguish suffered by him,? RBI said.

RBI said there have been instances where unsolicited credit cards issued have been misused before reaching the intended person.

?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,? said the central bank.

RBI also said banks have to inform the reason for rejection of credit card applications as per the guidelines.

In cases where banks offer insurance cover to their credit card holders, they may consider obtaining in writing from the card holder the details of nominee/s for the insurance cover in respect of accidental death and disablement benefits. Banks may ensure that nomination details are recorded by the insurance company, RBI said.