New RBI rules: RBI publishes new rules and penalties for credit and debit cards

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The Reserve Bank of India (RBI) has overhauled the rules governing debit and credit cards by introducing penalties for banks for issuing or upgrading customer cards without prior consent. It also opened a window allowing non-bank financial companies (NBFCs) to issue credit cards with prior approval from the regulator.

The regulator has asked banks to ensure that late payment interest is not adjusted to the principal of the loan resulting in negative amortization. Banks have also been asked to ensure that unpaid fees, levies and taxes are not capitalized for compounding interest.

The new guidelines come into effect on July 1, 2022 and will apply to all scheduled banks and NBFCs.

Banks with a net worth of Rs 100 crore and above are allowed to undertake credit card business either independently or in agreement with other card issuing banks/NBFCs. Urban Cooperative Banks (UCBs) with a minimum net worth of Rs 100 crore and a basic banking solution in place can also issue credit cards after approval from the RBI.

NBFCs will need special permission from the RBI to issue credit, debit or charge cards virtually or physically with a minimum net fund of Rs 100 crore.

The RBI identified for the first time the unsolicited issuance or upgrade of cards, putting the blame on the banks for any liability arising from such issuances.

“In the event that an unsolicited card is issued / an existing card upgraded and activated without the express consent of the recipient and the recipient is charged for the same, the card issuer shall not only reverse the charge immediately , but also pay a penalty without hesitation to the recipient amounting to twice the value of the charge waived. compensation payable by the card issuer to the recipient for unsolicited charges in accordance with the provisions of the ombudsman scheme, i.e. for loss of complainant’s time, expenses incurred, harassment and mental anguish suffered by him/her,” RBI said.

The central bank stressed that any loss resulting from misuse of these unsolicited cards will be the sole responsibility of the card issuer and the person in whose name the card was issued will not be held liable. . “Card issuers must ask the cardholder for one-time password (OTP)-based consent to activate a credit card, if the credit card has not been activated by the customer for more than 30 days from the date of issue. If no consent is received for activating the card, card issuers must close the credit card account at no cost to the customer within seven business days from the date request for client confirmation,” RBI said.

Banks were also prohibited from sharing information with credit reporting companies prior to card activation. Any credit information relating to these inactivated credit cards already reported to credit reporting companies should be removed immediately, RBI said.

Card issuer representatives can only contact customers between 10:00 a.m. and 7:00 p.m.

Banks must honor the request to close a credit card, immediately notifying the customer of the closure via email, SMS, etc. Customers should have multiple channels such as helpline, dedicated email id, interactive voice response (IVR), visible link on website, online banking, mobile app or any other mode to close their charts and cannot insist on any channel.

“Failure on the part of card issuers to complete the closing process within seven working days will result in a penalty of Rs 500 per day of delay payable to the customer, until the account is closed provided there is no If a bank card has not been used for a period of more than one year, the procedure for closing the card will be initiated after informing the holder. Within 30 days, the card account will be closed by the card issuer, subject to payment of all dues by the cardholder,” RBI said.

After the credit card account is closed, any available credit balance on the credit card accounts will be transferred to the cardholder’s bank account.

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