Explained: How will RBI’s new rules benefit credit cardholders

With an aim to safeguard the interests of credit card holders, the Reserve Bank of India (RBI) recently issued regulations on various issues pertaining to credit cards. Once the new rules come into effect, card companies will require the explicit consent of a customer to issue a credit card or upgrade an existing one. The Reserve Bank of India’s (RBI) new rules for credit cards will be effective from 1 July 2022 and will benefit customers.

Here is all you need to know about credit card new rules which will be applicable from July onwards:

Customer consent

Credit card issuers, either banks or other entities, have to now mandatorily take the explicit consent of the customer for issuing credit cards, upgrading their features, enhancing the credit limit, and offering other products/services along with the card. If an unsolicited card is issued or an existing card is upgraded without the consent of the recipient and the latter is charged for it, the card issuer will not only have to reverse the charges but also pay a penalty of twice the value of the charges reversed to the customer. “In addition, the person in whose name the card is issued can also approach the RBI Ombudsman who would determine the amount of compensation payable by the card-issuer to the recipient of the unsolicited card as per the provisions of the Ombudsman Scheme, i.e., for loss of complainant’s time, expenses incurred, harassment and mental anguish suffered by him/her,” the central bank said in its notification titled Master Direction – Credit Card and Debit Card – Issuance and Conduct Directions, 2022.

New rules for credit card holders: OTP-based customer consent

Card issuers shall seek One Time Password (OTP) based consent from the cardholder for activating a credit card if the same has not been activated by the customer for more than 30 days from the date of issuance. If no consent is received for activating the card, card issuers shall close the credit card account without any cost to the customer within seven working days from the date of seeking confirmation from the customer. In case of a renewed or replaced card, the closure of an inactivated card shall be subject to payment of all dues by the cardholder.

Closure of credit card

The cardholder has to be immediately notified about the closure through email, SMS, etc about the closure of the credit card. The credit card issuer has to provide multiple channels for the submission of requests for the closure of credit card accounts. These include a helpline, dedicated e-mail-id, Interactive Voice Response (IVR), prominently visible link on the website, internet banking, mobile app or any other mode. The card-issuer shall not insist on sending a closure request through post or any other means which may result in the delay of receipt of the request.

You will be paid Rs 500 per day if there is a delay in closure

For the closure of a credit card, the RBI has made it mandatory for the issuer to honour the request within seven working days, failing which the issuer will be penalised. In such a case, the card issuer will have to pay a penalty of Rs 500 per day for the delay to the customer till the account is closed, as long as there is no outstanding in the account.

In case a credit card has not been used for one year, it can be closed after sending a notice to the customer, RBI said.

Modification of billing cycle

Cardholders will now be given a one-time option to modify their billing cycle of the credit card as per their convenience. Also, if the cardholder protests any bill in the statement, the card issuer must provide an explanation on this within 30 days of the date of complaint. Further, no charges (including interest) shall be levied on transactions disputed as ‘fraud’ by the cardholder until the dispute is resolved.

Interest rates and other charges

The card issuers will have to provide a concise one-pager of all the fees and charges along with the credit card application to the customer. The fact statement will cover important aspects such as interest rate and quantum of charges. Card issuers are directed to be guided by the instructions on the interest rate on advances issued by the Reserve Bank as amended from time to time while determining the interest rate on credit card dues. Interest charged on credit cards shall be justifiable having regard to the cost incurred and the extent of return that could be reasonably expected by the card issuer. The card-issuers shall publicise through their website and other means, the interest rates charged to various categories of customers. Card issuers shall indicate upfront to the credit cardholder, the methodology of calculation of finance charges with illustrative examples, particularly in situations where only a part of the amount outstanding is paid by the customer.

Telemarketing calls

Card issuers will have to make sure telemarketing calls follow the rules and regulations on the subject issued by the Telecom Regulatory Authority of India (TRAI). The representatives of the card issuing companies can only contact the customers between 10 am and 7 pm.

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