Taken for a ride: Customer complaints relating to free cards are on the rise

Saugata Roy, a webmaster at a Calcutta-based media company, had resolved never to own a credit card. First of all, he didn’t like the idea of being under the burden of credit and, secondly, he did not understand how the system worked. But his resolve was not to last for long. A smart agent of a credit card company persuaded him to opt for a “lifetime free” credit card.

Roy had no idea that this would be the start of a long and harrowing experience. “I was told that the card would be active for life even if I didn’t use it at all. But in less than a month, they started calling me regularly, urging me to make at least one transaction for it to become active,” he says. So Roy paid through his card once and thought the matter had ended there. But it was not to be.

A few months later, the bank began to press him to go for a family insurance policy of ICICI Prudential that was being offered at a discount to the card’s customers. Initially, Roy said that he was not interested. “But they kept on nagging me and in sheer frustration I said ‘ok, send me the details’,” he says.

But instead of the details, Roy received a full-fledged insurance policy although he had not signed any document agreeing to accept the policy. When he tried to contact the bank, they said the matter was between him and the insurance company. Not only that, now his credit card statement showed a sum of Rs 7,000 as the amount he had to pay for availing of the policy. He now tried to cancel both the policy and the credit card. But despite verbal assurances, nothing has been done so far. And he continues to get his credit card statements.

Experts say that consumers who take “lifetime free” cards are often targeted for such schemes. “The strangest thing here is that though the customers pay the premium for an insurance policy, the agreement really takes place between the credit card company and the insurance company,” says C.V. Giddappa, general secretary of the Bangalore-based The Credit Card Holders Association of India (CCHAI). “Customers of free cards have to understand that there are no free lunches. Before going for such a card, they have to get all the clarifications from the credit card company,” he cautions.

Customer complaints relating to free cards are in fact rising exponentially. “We receive lots of complaints regarding the so-called free cards. These include customers suddenly being charged membership fees, constant pestering to accept insurance policies, surcharges that customers don’t understand and so on,” says V.M. Oza, director, complaints, Consumer Education and Research Centre, Ahmedabad.

Akhil Bhagwandas Nagar, a resident of Ahmedabad, also came to grief after he accepted a lifetime free credit card. But soon afterwards, he was asked to pay an annual fee for it. Nagar wanted to cancel the card forthwith. But this proved to be a surprisingly difficult task. Then, after running from pillar to post for about three months, he finally managed to cancel his card.

Free credit card holders are also provided with apparently tempting offers, especially when they do not use the card often enough. “I was offered a loan against my credit card even though I had not used the card on a single occasion. To my astonishment, I received a letter from the bank saying that a loan of Rs 60,000 had been sanctioned to me,” says Bharat Negi, a Delhi-based government employee. His only crime was that he had listened to the tele-caller’s spiel and had asked her about the interest rates on loans. Despite making many calls to the customer care centre, Negi’s “loan sanction” is yet to be cancelled.

These are not isolated cases. According to consumer organisations, more and more customers report being taken for a ride by credit card companies. “We receive hundreds of complaints from customers each day,” says Arun Saxena, president of the Mumbai-based International Consumer Rights Protection Council (ICRPC).

Consumer organisations hold that many of the problems relating to free credit cards arise from the unethical behaviour of direct sales agents who are not the employees of credit card companies. “These agents are given sales targets, and to meet these targets, at times they deliberately mislead gullible consumers,” says Giddappa.

Again, even though the Reserve Bank of India has formed the Banking Codes and Standards Board of India to monitor complaints regarding credit cards, consumer organisations point out that nothing much has been done on the ground to check unethical practices or harassment of customers.

Of course, the agreement between the credit card customer and the issuing bank is always loaded in favour of the bank. Most agreements have a line which normally says, “the bank retains the right to change any condition without prior notice”. This one sentence gives the company overriding powers, say those in the know. As Giddappa points out, “If you go to a court of law saying that the company violated certain conditions given in the agreement, the company will throw this one sentence in your face and say, ‘we changed the condition’.”

But credit card companies do not think the problem is as rampant as consumer organisations make it out to be. “It is not as though everybody who gets a free credit card faces harassment. The industry is maturing and it will take some time before such problems are solved,” says a top executive of a leading credit card company.

Still, experts say that consumers need to take a few precautions before accepting a free card. “The basic aim of a direct sales agent is to sell you a card and he may resort to every trick in the book to do that. So you must ask for all clarifications and documents and take everything in writing. Also, instruct him clearly that if anything goes against the agreed terms, you will cancel the card,” says ICPRC’s Saxena.

It is advisable never to approve anything over the phone. In case you have a grievance against the bank, says Giddappa, “I would advise customers to send their documents and letters through registered post rather than by courier or by normal post. Then the company cannot deny the receipt of your documents.”

If your problems persist, you should knock on the doors of a consumer court and file a case against the company.