The guidelines on ‘credit card operations’ issued by the Reserve Bank of India to all commercial banks is certainly an improvement on the recommendations of the Working Group on Regulatory Mechanism for Credit Cards, but not adequate to protect fully the interests of consumers.

To consumers who were at the receiving end of several unfair trade practices resorted to by the credit card industry, the RBI’s decision in October last year to constitute a Working Group to examine a regulatory mechanism came as a ray of hope. But the recommendations of the working group came as a big disappointment. Now the RBI has based its guidelines on the feedback received from consumers and consumer groups, in addition to the recommendations of the Working Group. That’s a positive development, but far more needs to be done.

The guidelines, for example, fail to address one of the major concerns of consumers vis-?-vis the credit cards: the very high interest rate charged by banks on revolving credit and also on loans given to credit card holders. Even though interest at the rate of 32 to 40 per cent is too steep in this age of financial sector reforms and falling interest rates and consumer groups have been demanding a cap on the lending rate of credit card companies, the RBI has unfortunately not addressed this issue.

Another contentious issue is the unfair ‘late fee penalty’ levied by the banks. First of all, the late fee, that has no relevance to the payment amount due, is unreasonably high. Then there is another problem. Banks that have provided a large number of collection centres for the convenience of consumers however do not have an efficient collection system. As a result, customers are not only harassed for alleged non-payment of dues, but are also charged ‘late payment’ penalty, despite having sent the same well in time. The RBI guidelines need to look at this problem and also impose a stiff penalty on those who levy late fee on customers who have deposited their cheques well in time.

The guidelines also need to address the problem faced by a consumer in discontinuing with a card and impose a stiff penalty on banks that refuse to accept the customer’s decision and continue to charge an annual fee and levy interest on it too.

Ultimately, we need to have an independent authority to regulate the credit industry. But till such time, the RBI as the regulator needs to strengthen further these guidelines and also ensure their stringent enforcement. It should also respond with alacrity to consumer complaints on these issues.