The Reserve Bank of India has announced new regulations around credit cards, which would be effective from July 1, 2022. Here are top 10 changes the new regulations would bring in that you should know:
1. Transparency in Credit Card Application Process: Credit Card applicants will get a one-page key fact statement with important details of the credit card, such as interest rate and other applicable charges, at the time of card application. Till now, this was provided only after card issuance, sent to customers. Further, if an application is rejected, the card issuer needs to specify the reason for credit card rejection in writing to the applicant.
2. Issuance & Upgradation of Credit Cards only with customer consent: Credit Card issuers can provide a new credit card or upgrade an existing credit card, only when they have an explicit consent from the customer. In case a card is issued or upgraded without customer consent, for which the cardholder is billed, the card issuer would have to reverse the applicable charges and also pay a penalty, amounting to twice the value of the charges. Also, if a new credit card has been misused before reaching the customer, any loss arising out of it shall be the responsibility of the card- issuer.
3. Any change in Card’s T&C needs to be informed to the consumers: As per the new regulations, credit card issuers have to inform its card holders of any change in the credit card’s terms and conditions. The issuer also has to send the revised MITC (Most Important Terms & Conditions) to consumers in case of any change in it. Cardholders will be provided a 30 days notice to either agree or disagree to the new MITC. In case, the credit cardholder doesn’t share his/her consent/dissent within 30 days, the card issuer can assume the card holder has accepted the revised T&Cs.
4. No increase in Credit Limit without customer consent: Credit Card issuers would be able to increase credit limit on a credit card, only with explicit customer consent. In case, the card issuer needs to decrease the credit limit on a card, this also needs to be communicated to the card holder.
5. Closure of inactivated cards: In case a card holder has not activated a new credit card within 30 days of card issuance, the card issuer needs to seek consent from the card holder to activate the card through an OTP-based process. However, in case the cardholder does not provide the consent, the card issuer has to close the credit account within 7 days of seeking consent from the cardholder.
6. No Updates to Credit Bureaus until Card Activation: Credit Card issuers can now report information of a new credit card to the Credit Bureaus only after the credit card has been activated by the card holder. Any information related to inactivated credit cards that has already been reported to Credit Bureaus have to be withdrawn within 30 days of RBI’s new directions.
Also, card issuers need to inform the card holders about any information that is being shared with the credit bureaus regarding repayment record, credit history etc.
7. Closure of Credit Card: Any request for closure of a credit card must now be resolved within 7 working days, (provided there is no outstanding balance). In case the card issuer does not complete the process of closure within seven working days, it shall result in a penalty of Rs. 500 per day of delay payable to the customer, till the closure of the account.
8. Prior notice to customers before declaring them “defaulter”: Card issuers would also have to give a 7-day notice period to card holders, informing them about their intention to report them as defaulter to the credit bureaus and allow them to clear their outstanding dues during this period.
9. Transparency in conversion of purchases into EMIs: To ensure transparency and reduce mis-selling around EMI conversion of purchases, card issuers need to clearly specify the principal, interest and any upfront discount provided by the merchant/card-issuer, prior to the conversion. Also, any EMI inclusive of any interest component, cannot be promoted as a no-cost EMI by the card issuer. This also has to be separately indicated in the credit card bill/statement.
10. Insurance benefits to be offered with customer consent: Card issuers will be able to offer insurance benefits on credit cards only after the card holder’s approval. Further, all details related to the insurance cover have to be mentioned on credit card statements.