MUMBAI: NBFCs cannot undertake the business of credit cards or their issuance without prior approval of the Reserve Bank of India (RBI), the regulator said on Thursday. The notification contains significant steps to protect and for the interests of customers.
Any company, including a non-deposit taking one, will require a certificate of registration, apart from specific permission to enter into this business, the pre-requisite for which is a minimum net owned fund of Rs 100 crore and subject to such terms and conditions as the RBI may specify in this regard from time to time.
“Without obtaining prior approval from the Reserve Bank, NBFCs shall not issue debit cards, credit cards, charge cards, or similar products virtually or physically,” the regulator said in its notification. The direction also spelt out directions to issuers of credit cards in the interest of customers. Particularly, the issuance of unsolicited cards or upgrade and activation of existing cards without explicit consent of the recipient has been strictly prohibited. In case of such occurrence, without consent, for which the customer is billed, the card issuer has to reverse the charges forthwith and also pay a penalty without “demur” to the recipient at twice the value of the charges reversed.
“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 RBI also said unsolicited loans or other credit facilities should not be offered to the cardholders without seeking consent. In case an unsolicited credit facility is extended without the written and/or explicit consent of the cardholder and the latter objects to the same, the card issuer has to not only withdraw the facility, but will also be liable to pay a penalty considered appropriate by the ombudsman, if approached.
Also, Card-issuers are obliged to inform the cardholders of the implications of paying only ‘the minimum amount due’. A legend/warning to the effect that “Making only the minimum payment every month would result in the repayment stretching over months/years with consequential compounded interest payment on your outstanding balance” is to be prominently displayed in all the billing statements to caution the cardholders about the pitfalls in paying only the minimum amount due.
The most important terms and conditions (MITC) will specifically explain that the ‘interest-free credit period’ is suspended if any balance of the previous month’s bill is outstanding. The card-issuers shall specify in the billing statement, the level of unpaid amount of the bill i.e., part payment beyond ‘minimum amount due’, at which the interest-free credit period benefits would not be available to cardholders.