Credit card woes: MRTPC raps banks

The investigative arm of the Monopolies and Restrictive Trade Practices Commission has in a primary information report alleged flagrant flouting of the November 2005 RBI guidelines on credit cards by commercial banks like ICICI, HSBC and Citibank.

Taking the report into consideration, Justice O P Dwivedi and Justice M M K Sardana, chairman and member respectively of the Commission, have issued a notice of inquiry to banks.

The  commission had recently asked the director general (investigation and registration) to look into the alleged dubious practices adopted by Direct Selling Agents (DSAs), employed by commercial banks, for selling credit cards and the procedure adopted by commercial banks to inform subscribers about the relevant terms and conditions.

The report, prepared after seeking extensive replies from the banks, alleges that commercial banks are not taking due care in disclosing the relevant facts to the subscribers and users.

It has said that the banks, while soliciting for the  business of promoting sales of credit cards, are not disclosing the fact that its relationship with the DSA is on a principal to principal basis. The agents work as an independent party and are not agents of the bank.

This concealment of fact gives an impression to the subscriber that the agents are bank employees and hence they believe the promises, which later fall flat.

The report also alleges that the banks have not been abiding by RBI's guidelines to commercial banks and non banking financial institutions to advertise the 'most important terms and conditions' (MITC) of credit card facilities at all stages -  marketing, application, acceptance stage and subsequent communications.

The MITC includes the interest-free grace period, the schedule of charges, method of calculation of interest, penal charges and other levies.

It has also noted that banks levy penal charges without ensuring that statements have been received in time by the credit card holder. Besides, the report also notes that the banks do not have the postal address of the grievance redressal machinery.