Jan 19 - 25, 2009

The Central Bank has initiated steps to protect the customers from hidden charges on credit cards generally charged by the commercial banks without prior approval of the card holders.

The operational guidelines issued by SBP set the parameters for credit card business of commercial banks/DFIs, outlining code of conduct for various aspects of credit card operations including their marketing, interest rate charges, recovery of dues, billing processes etc.

The banks/DFIs would now be required to quote interest rate and service charges on annual basis. Although, they are free to set the aforesaid rates, banks/DFIs are required to set well-defined service level for each of the product/service; whether charged or free. Banks/DFIs should also inform the credit card holder on the interest rate or services charges through advertisement and/or sending information to card holders on their addresses.

Banks/DFIs should not levy any charge that was not explicitly mentioned either in the User Guide or Application Form or Schedule of Charges provided to the customer at the time of selling credit card, without the prior consent of the card holder. However, this would not be applicable to excise duty or other charges which may be levied by the Provincial or Federal Government or any other statutory authority from time to time. Banks/DFIs should, however, timely update the customers on the imposition of such levies. Banks are also advised that interest amount should be charged on net credit i.e. after deducting the amount paid by the card holder. The outstanding amount due to rounding-off of paisas, should not be considered as partial payment and interest amount should not be charged on it.

The banks/DFIs would be required to ensure that their recovery/collection officers should not resort to any verbal or physical harassment of the delinquent credit card holder, their family members, referees and friends during recovery/collection efforts. Recovery/collection officers should also not humiliate publicly or in private or intrude the privacy of the credit card holderís family members, referees and friends. Telephone calls and visits to credit card holders for recovery of unpaid dues should be restricted to a convenient time and the same may be defined in the Bank/DFIs public policy and should be properly communicated to customers at the time of issuance of credit card. In addition, recovery should only be made from principal card holder and in no case supplementary card holders shall be resorted to any sort of pressure to pay the unpaid amount. However, supplementary card holders may be contacted only to enquire about the whereabouts of the principal card holder. Moreover, banks/DFIs should not start recovery process for reported disputed transactions until the investigation carried out by card-issuing Bank/DFI/Banking Ombudsman/State Bank of Pakistan is completed. In case of wrong/ inappropriate basis of rejection of customer claim, bank/DFI would be liable for penalty.

With regard to marketing of credit cards, banks/DFIs should discourage aggressive and hard selling & marketing practices during working/office hours; except with prior appointment of the prospective customer. In case a customer is called during office hours for seeking appointment, he/she should be first asked for the option to continue with the call or not.

Banks/DFIs should seek prior consent of their customers/account holders for informing them on new products and services on telephone as and when introduced. In this regard, banks should maintain a ìDonít call listî comprising the contact details of those customers who do not want to be contacted. The list should be accessible to all marketing staff and they should be advised not to contact such customers /account holders for introducing or offering new banking products. In this connection, banks should update the database of existing customers within three months from the date of issue of these guidelines. Banks/DFIs should follow the Code of Conduct for marketing of credit cards which will be issued by Pakistan Banksí Association (PBA) in consultation with SBP.

The banks have been advised that credit card may only be issued by the banks/DFIs, pursuant to a written application duly filled and signed by the prospective customer. However, in order to reward and retain high-end existing customers, pre-embossed cards may be issued after a proper acceptance by the customer, which may be in the form of any verifiable mode such as recorded phone call. Nevertheless, these pre-embossed Credit Cards should be activated only after receiving complete application form from high-end customers and criteria for selecting high end customers must be defined in the bank policy.

Banks/DFIs are also advised that they should have an appropriate complaint resolution structure in place commensurate with the volume of complaints and better service consideration. Credit card complaints resolution mechanism must be prominently disclosed on the official website of the Bank/DFI. The Bank/DFI may also arrange online complaint registration on their websites. Complaint number should be provided to each complaint submitted to bank/DFI and same should be communicated to the Credit card holder. Banks/DFIs must resolve the disputed transactions/complaint of the credit card holder promptly and as per the franchise rules of VISA, MasterCard, AMEX or any other international card association, taking into account nature of the transaction, distances, time zones, etc. However, in no case complaint resolution time should exceed 45 days from the date of complaint for the transaction(s) under dispute originated within Pakistan. In addition, interest amount should not be charged to customer during investigation period. Bank/DFI will recover interest amount accumulated during investigation period only when the dispute is settled in favour of bank/DFI. If decision turns in favour of the customer, the bank/DFI needs to refund the amount of disputed transactions, even to those customers who had made the payment of disputed transaction and cancelled the card after lodging complaint.