Starting this month, the new Reserve Bank of India regulations came into effect on credit cards. These rules that were released months earlier range from card issuance to credit control and tokenization. These are the important and prominent rules that affect consumers, so one should be aware of them.
When activating after issuing a credit card, the central bank has implemented strict rules in favor of consumer protection. If a person does not activate a new card within 30 days of issuance, the issuer must cancel the account within seven business days without charging a fee. Of course, the card could be activated by obtaining an OTP (one-time password) thus giving the consumer the freedom to reject an issued card.
The new rules even contain guidelines for credit enhancements that card issuers perform periodically. Most card issuers use their underwriting, risk metrics, credit history, and consumer usage to automatically increase the credit limit of the card issued. With the new regulations, issuers cannot increase the credit limit without written authorization from the customer. However, higher credit consumption (more than 40%) will have a huge impact on consumers’ credit rating, so avoid credit rotation.
The new rules also require card issuers to ensure that bills/statements must be provided promptly by email and to allow consumers at least fifteen days before interest is charged. The RBI said: “In order to avoid repeated complaints about late billing, the card issuer may offer to issue invoices and account statements via internet/mobile banking with the permission of the cardholder. . Card issuers must implement a system to ensure that the cardholder receives the billing statement.” And in the event of a dispute, card issuers must respond within 30 days from the date claim form, if applicable with proof Credit cardholders should be given a one-time chance to allow them to customize their credit card billing cycle This is important as each card has its own billing cycle and when multiple cards are used, this may result in accidental loss of payment.When closing a card, the issuer must notify the closure request by mail or SMS.
Customers should have several options such as Interactive Voice Response (IVR), an easily accessible link on the website, internet banking, mobile app and/or any other method to close the credit card and not cannot insist on a specified route only. The card issuer is required to respond to any card cancellation request within seven business days provided that all arrears are cleared.
The new rule does not allow entities involved in card transactions to store card-related transactions.
Tokenization replaces the 16-digit card details with an alternate code, called a token. Merchant sites generally store customer data to avoid entering repeated data with each transaction. It may lead to loss of data/privacy due to hacking etc. Tokens help protect users by replacing data with a random series of alphanumeric codes (alphabets and numbers) generated by an algorithm. This helps protect sensitive data. However, tokenization is optional on the user side and whoever does not choose must enter their card details with each transaction. This eliminates forced or hard sell cases and protects victims from fake applications. The rule of no charge on the card is also a boon for consumers. Also note that if an active card is not used for a stipulated period, this automatically makes it inactive. Therefore, it is best to regularly use all cards to keep them active.
(The author is co-founder of “Wealocity”, a wealth management company and can be reached at [email protected])