The Hindu Business Line : Some relief on the card

The ambit of protection for a customer ranges from receiving unsolicited telephone calls for marketing of products to use of coercion and threat by credit-card issuers or their agents to collect debts/dues.

Following the Reserve Bank of India's notification of the Banking Ombudsman Scheme, 2006, a credit-card user can apply to the Ombudsman concerned for redress of grievances besides moving a consumer or a regular court.

However, to properly pursue claims at any of these forums, it is important for a credit-card user to know his rights and obligations, and have an understanding of the RBI guidelines on credit-card operations, the Banking Ombudsman Scheme, the Consumer Protection Act, 1986 and some important rulings of consumer courts.

RBI Guidelines

To regulate credit/ATM/debit card businesses, the RBI had notified guidelines for the issuers. They are based on the recommendations of the RBI-constituted `Working Group on Regulatory Mechanism for Cards' to look into credit card-related complaints and suggest regulatory measures to encourage growth of cards in a safe, secure and efficient manner.

The salient features of the Guidelines, which took effect from November 30, 2005, are:

All credit-card issuers should provide Most Important Terms and Conditions (MITCs) to customers/prospective customers.

MITCs should include information such as joining fee, annual membership fee, cash advance fee, service charges for certain transactions, interest-free grace period (illustrated with examples), finance charges for revolving credit and cash advances, overdue interest charges and charges in case of default.

MITCs should be in Arial-12 points and not in fonts that are difficult to read with naked eyes.

Card issuers should quote annualised percentage rate on card products (separately for retail purchase and cash advance).

Card issuers should not provide unsolicited cards, loans and any other credit facilities or unilaterally increase credit limits.

Card-issuing banks/non-banking financial companies (NBFCs) should maintain "Do Not Call Registries" containing phone numbers of customers and non-customers who have informed them that they do not wish to receive unsolicited calls/SMS for marketing of credit card products.

Card-issuing banks/NBFCs would be responsible, as the principal, for all acts of omission or commission of their agents (direct sales agents/direct marketing agents and recovery agents).

Card issuers should follow the RBI's Fair Practice Code for Lenders and also the Indian Banks Association's Code for Collection of Dues and Repossession of Security.

By bringing about clarity in contractual relationship between credit-card issuers and users, the Guidelines protect customers/prospective customers from aggressive companies and their sales and marketing agents. The ambit of protection for a customer ranges from receiving unsolicited telephone calls for marketing of products to use of coercion and threat by credit-card issuers or their agents to collect debts/dues.

Ombudsman Scheme

The Guidelines further provide that a customer who fails to get a satisfactory response from a card issuer within 30 days of lodging of complaint may approach the Banking Ombudsman concerned for redress before expiry of one year from the date of receipt of reply from the bank or 13 months from the date of representation.

Currently, there are 15 Banking Ombudsmen who try to resolve complaints through a process of conciliation or mediation.

The modified scheme even allows a customer (including a Non-Resident Indian) or his authorised representative (other than an advocate) to file a complaint online on www.bankingombudsman.rbi.org or through e-mail for "non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank on ATM/debit card operations or credit card operations."

Although the scheme provides a format, it is not mandatory to use it to lodge a complaint which may be filed on a plain paper incorporating information necessary for resolving grievances. The Office of Ombudsman does not charge any fee for resolving complaints.

As for applicability of the decision of Ombudsman, it is open to a complainant to either accept the award in full or reject it.

Banks cannot reject the award but may, with the sanction of chairperson, or in his absence the managing director or the executive director or the chief executive officer, approach the appellate authority against the decision of an Ombudsman. A dissatisfied complainant can also approach the designated appellate authority — a RBI Deputy Governor.

Consumer Courts

For redress of grievances under the Consumer Protection Act, a credit-card holder may approach a district forum if the value of goods and services provided is less than Rs 20 lakh; the State Commission if the value is more than Rs 20 lakh but less than Rs 1 crore; and the National Commission if the value exceeds Rs 1 crore.

The major advantage of the consumer court is that it allows a card user to file a complaint with the Consumer Forum of the district of which he is a resident provided the cause of action arose within the jurisdiction of that District Forum.

The law also requires that a complaint be filed within two years from the date on which the cause of action arose in a District Forum of appropriate jurisdiction after payment of a nominal fee depending upon the value of disputed goods and services.

(The author is Senior Partner, Titus & Co., Advocates, and can be contacted at dtitus@titus-india.com.)

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