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July 09, 2010

  • News:  RBI Releases New Mandates For Credit Card Issuers

    India's banks and credit card companies are being warned by the Reserve Bank of India (RBI) to adhere to all guidelines pertaining to transparency regarding interest rates. Financial institutions are also being reminded of the mandates relating to the assessment of credit card fees or else face serious penalties and consequences. In a statement released by the RBI, all financial institutions are being told that they must adhere to the rules in both "letter and spirit" or face stiff penal action. The RBI had released new stiffer rules for banking institutions and credit card companies in wake of a growing and significant number of consumer complaints saying they have been subject to deceptive and unfair treatment by the financial companies.

    Most of the complaints received by the RBI pertained to the excessive interest rates. Many were also complaining that they had received unsolicited credit cards which was of great concern in respect to possible fraud. Cardholders have also been complaining about the added unfair fees such as annual credit card service fees, phone solicitations, incorrect billing, and difficulty in contacting the credit card issuer as well as poor customer service. RBI rules issued in 2007 called for lenders to set ceilings on interest rates and other fees; however, it appears most card issuers found loopholes in the rules that allowed them to participate in these abusive activities.

    New rules require credit card companies to declare interest rates upfront as well as other penalties and charges. Banks are also being required to outline the methodology used to calculate interest rates along with illustrations and samples. Furthermore, banks are being told to do a better job at making sure that cardholders are receiving proper billing. If a cardholder places a complaint, the bank must respond within 60 days with a clear explanation, documentary evidence where required and with amicable spirit.

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