Impact of the RBI’s new guidelines on debit and credit card issuance

By Puja Sharma

The Reserve Bank of India (RBI)  announced new guidelines for the issuance of debit and credit cards, as well as for instructions to issuance agencies. The new rules announced by the Central Bank will come into effect on 1 July this year.

The RBI has asked all merchants and payment gateways to remove customer details and debit and credit cards stored on their end of the payment process to provide better security to people.

The new rules require card issuers to honor any request to close a credit card within seven working days. Failure to do so will result in the issuer paying a penalty of Rs 500 per day to the cardholder until the card is closed, provided no outstanding dues exist in the account.

Guidelines for a credit card

The card-issuer must remember that the “issue of unsolicited cards/up-gradation is strictly prohibited”. In case a credit card provider upgrades an existing card or activates an unsolicited card without the customer’s permission, and bills them for the same, the issuers will have to withdraw the facility. They will also have to pay a penalty amounting to twice the value of the charges reversed, according to the RBI’s new card guidelines.

The affected customer can also approach the RBI Ombudsman for redressal of their grievance. The card issuers should ensure “prudence while issuing credit cards and independently assess the credit risk while issuing cards to persons, taking into account independent financial means of applicants.” The companies should also ensure that they/third-party agencies do not intimidate, or harass any customers for debt collection.

Written consent is needed before the issuance of cards. If written consent is not possible, issuers can use digital means for the consent but must communicate the same to the RBI. No hidden charges can be added while issuing credit cards free of charge.

Changes in credit card charges can be made only after giving a prior notice of one month. According to the RBI’s new rules, if the cardholder wants to surrender their card on account of any changes in charges to their disadvantage, they can do so without paying any extra charge. The rule is subject to payment of all dues by the cardholder.

Debit cards shall only be issued to customers having savings bank or current accounts. Banks shall not force a customer to avail of a debit card facility and shall not link issuance of a debit card to avail of any other facility from the bank.

On loss of card (credit or debit)

Card-issuer must block a lost card immediately after being informed. Card issuers shall provide detailed information on how to report loss, theft, or unauthorized use of a card or PIN. This must include multiple channels such as a dedicated helpline, dedicated number for SMS, dedicated e-mail-id, Interactive Voice Response, clearly visible link on the website, internet banking and mobile app, or any other 24×7 mode of reporting. Card issuers shall immediately send a confirmation after the blocking of a card.

About the billing

Card-issuers shall ensure that there is no delay in sending/dispatching/emailing bills/statements and the customer has a sufficient number of days (at least one fortnight) for making payment before the interest starts getting charged. Along with that, no charges shall be levied on transactions disputed as ‘fraud’ by the cardholder until the dispute is resolved.

Card-issuers shall seek the explicit consent of the cardholder to adjust credit amount beyond a cut-off, one percent of the credit limit or Rs 5000, whichever is lower, arising out of refund/failed/reversed transactions or similar transactions against the credit limit for which payment has already been made by the cardholder.

Privacy

Card issuers shall not reveal any information relating to customers obtained at the time of opening the account or issuing the card to any other person or organization without obtaining their explicit consent, about the purpose/s for which the information will be used and the organisations with whom the information will be shared. Under a co-branding arrangement, the co-branding entity shall not be permitted to access any details of the customer’s accounts that may violate the card-issuer’s secrecy obligations.