New Credit Card Rules Effective from July 1

The Reserve Bank of India announced new regulations related to the issuance and conduct of credit cards in April. While the implementation of some of these has been postponed to October 1, 2022, some regulations would be effective from July 1, 2022.

Key Regulations Effective from July 1, 2022

• Credit card issuers cannot provide a new credit card or upgrade an existing credit card without the customer’s consent in writing. In case, any card is issued or upgraded without consent, the card issuer is liable to reverse the charge and pay a penalty if the cardholder is billed.
• Any request for closure of a credit card from the card holder must be fulfilled within seven working days, subject to no outstanding balance on the card. In case, the closure is not completed within seven days, the card issuer is liable to pay a penalty of Rs. 500 per day until card closure.
• If the cardholder has not used the card for more than a year, the card issuer must initiate the process of card closure after seeking confirmation from the cardholder. If the cardholder does not reply within 30 working days, the card issuer shall close the card account and report the same to the Credit Bureaus, within 30 days.
• Card issuers will now require customer approval to offer insurance cover on credit cards (to cover up for liabilities arising out of lost cards and frauds). It is mandated that all details related to the insurance cover are mentioned on the billing statement.
• Till now, the terms & conditions associated with a credit card were disclosed to the applicant after card issuance. However, from July 1, credit card applicants will receive a one-page key fact statement at the time of application. This will include important details like fees & charges, interest rates, billing details- acceptable mode of payment, customer care details and credit and cash withdrawal limits.
• In cases where the credit card issuers reject a card application, the issuers need to specify the reason for rejection in writing to the applicant.
• Credit card issuers also have to now disclose the interest charges and their calculation in different scenarios (such as retail purchases, balance transfer, cash advances, non-payment of the minimum amount due, late payment, etc.,) upfront with illustrated examples on their websites, in the billing statements and in the welcome kit offered to the customers.
• Card issuers must also ensure transparency in the process of conversion of purchases into EMIs. EMI details such as principal, interest, and offer discounts must be informed to the customer before the conversion takes place. These details must also be mentioned in the credit card statement. Also, EMI inclusive of interest charges must not be promoted as ‘no-cost’ EMI.
• Any change in credit card terms and conditions must be informed to the cardholder by sending him/her a revised MITC. These changes must be informed one month from the date of implementation, within which he/she can reject or accept the new MITC. If a customer does not respond within 30 days, it is assumed that he/she has accepted the new terms. In case, the cardholder is not willing to keep the card as per the revised changes, the card account must be closed without imposing any charges, other than the outstanding balance.
  
• Credit Card issuers should provide customers with a ‘one-time’ option to modify their billing cycle. Also, the card issuer should ensure that the billing statement is sent on time, for the cardholders to have sufficient days to pay the bills. Also, if the cardholder reports any transaction as ‘fraud’, the issuer cannot impose any charge on it, unless the dispute is resolved.
• Earlier, the credit information related to cards was reported from the time of card issuance. However, from now, credit card issuers must report information to Credit Bureaus, only if a new card is activated by the card user and not prior to that. After the card activation, every information shared with the credit bureau must also be informed to the customer.
• In case of late payment or outstanding dues on a credit card, the issuer must report the same to the credit bureau, only when the past payment has been due for more than three days. In addition to that, before reporting a customer’s default to the Bureau, the issuer must first give a seven-day notice period to the cardholder informing him/her of the intent of declaring them as a ‘defaulter’.

New Regulations to be Effective from October 1, 2022

• In case a cardholder has not activated his/her card within 30 days of card issuance, the issuer will require OTP-based consent to activate the card. If the cardholder does not provide consent for activation, the card issuer shall close the card account within seven working days from requesting such consent. Please note that this is not applicable on cards that are renewed or replaced.
• The card issuer cannot revise the credit limit, without bringing it to the notice of the customer. In case the limit on a credit card is to be increased, it could be done only after the cardholder’s approval. Also, in case the limit is decreased, it must be communicated to the cardholder.
• RBI mandates, “The unpaid charges/levies/taxes shall not be capitalized for charging/compounding of interest.” Currently, the carry forward amount is compounded including additional charges such as late payment, finance charges, etc. However, as per the revised regulations, no compounding is allowed on these charges.