Press Release
Credit Cards: CERC Pleads for More Consumer-friendly Rules
Consumer Education and Research Centre
www.cercindia.org
Ref : E&R/CCard/Press/2005/JSD
The Reserve Bank of India (RBI) released on 25 April 2005 the Report
of its Working Group on Regulatory Mechanism for Credit Cards.
Consumer Education and Research Centre (CERC), Ahmedabad, sent its
suggestions and comments on the Report to the RBI Governor. It also
thanked the Working Group for referring in the Report to the
presentation made by Prof. Manubhai Shah, Chairman Emeritus, CERC, at
the first meeting of the Group.
In its comments on the Report on credit card regulations, CERC
objected the "unilateral" and "unfair" terms and conditions of the
banks or card companies. The printed conditions are unilateral and
unfair, presented to the consumers on the `take it or leave it'
basis, leaving no chance for any question or negotiation.
CERC referred to and relied upon the Supreme Court of India's
decision in the case of Life Insurance Corporation of India vs. CERC
Ahmedabad (AIR 1995 p. 1811). A paragraph summarising the decision
says, "Any contract or any condition of contract by and between two
parties of inequal bargaining capacity, if they are one-sided,
unilateral or unfair, the said contract or conditions of contract
offend the conscience of the Constitution of India, viz.
citizen's
Fundamental Right to Equality before Law and Equal Protection of Law,
and therefore it is unconstitutional, illegal and unenforceable."
While acknowledging the Working Group's reference to the laws of
various countries, CERC pointed out that the Working Group had failed
to report two specific laws which have a bearing on this subject.
They are : (a) The Fair Debt Collection Practices Act (Sept. 30,
1996) of USA; and (b) the Credit Contracts and Consumer Finance Act,
2003, of New Zealand.
The US law prohibits employing any agency for the recovery of dues
and explicitly states that the recovery of the dues shall be only
through the process of law. The New Zealand law is the most consumer-
friendly piece of legislation that provides different kinds of
insurance covers to consumers and the freedom to the consumers to
cancel the contract.
By and large, foreign countries have legislations that give insurance
covers to lost, stolen or misplaced cards to protect the consumers
and in such events a small limited liability to consumers, CERC
proposed to have such provisions in India.
The Report disallows non-banking finance companies (NBFCs) to enter
into the credit card business. But CERC recommends to the Working
Group to allow NBFCs to enter the business to ensure more competition
which would be in consumer's interest.
CERC has stressed that the information about credit card holders
should not be released to any other agency or body except banks or
through recently created national agency for ascertaining
creditworthiness of the borrowers.
CERC suggested that the regulatory body should be explicitly
empowered to award reimbursement and/or compensation and/or cost for
loss or injury suffered by the consumers on account of any one or
more of the violations on the lines of provisions of Consumer
Protection Act, 1986.
Opposing the Banking Ombudsman being recommended as a redressal
agency, CERC urged the Working Group to spell out the nature and
extent of jurisdiction of the Ombudsman on the lines of powers of
Fora and Commissions under the Consumer Protection Act.
Date :
16/05/2005
Pritee Shah
Place : Ahemdabad
Editor, INSIGHT - The Consumer Magazine
======================================================================
Consumer Education and Research Centre
Thaltej, Sarkhej-Gandhinagar Highway, Ahmedabad - 380054,
Gujarat, India
Phone : 079-27489945/46, 27450528, 30121001-2-3
Fax : 079-27489947
Email : [EMAIL PROTECTED], [EMAIL PROTECTED]
Website : www.cercindia.org
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