Don’t let them push a credit card with your new a/c

Recently, I read about the experience of a newspaper columnist on how a credit card was issued to her while opening a savings account and the ordeal she had to go through after that.

As confessed by her in her column, it  happened because she  just signed on the dotted line of the application form for  opening the savings bank account and handed it over to the bank’s representative instead of filling it up herself. 

This act is not an exception as many of us do that. Normally, bank representatives help you open a savings account by asking you to sign the form insisting that they will fill it up so that you don’t waste your time. It is only later that you repent this decision.

Besides an unsolicited credit card, customers sometimes also get an unwanted insurance cover for which premium is charged or for fraudulent billing in the first credit card statement.

Since a lot of people do not use the credit card, they do not bother to act further after receiving one. When the customer does not use the card, the bank concerned does not receive the money of either annual fees or insurance debited and in due course writes off the balance outstanding in respect of such a customer.

The banks report such write off to Cibil as default by the customer and the horror story unfolds when the customer applies for a loan.
We receive a lot of queries  from readers about their names appearing as defaulters in the Cibil records.

A majority of them have issues related with credit cards.

Due to the banks’ issuing credit cards to unsuspecting customers, a lot of them are deprived of credit facility like loans. The situation becomes grave in specific cases when a person who has never borrowed any money, makes down payments towards the purchase of a property or a car hoping that he will get a loan for the balance amount based on income eligibility parameters.

The shocker comes when the bank informs him that his name appears as defaulter in the Cibil record. The small act of believing a bank representative while opening an account leads to his dream of owning a house or a car get crushed.

It becomes difficult for the customer to arrange funds for the balance amount.

There are plenty of cases where people have suffered due to the bank bundling the credit card with the account opening form. Banks probably do this to expand their customer base and to ensure that the customer does not go to their competitor.

Almost all private sector banks resort to such practice without realising the hardship it causes the customer later.

To help such customers who are not defaulters in the real sense of the term, I suggest that the Reserve Bank of India (RBI) ban banks from bundling other products with the account opening form.

A step like this, on the part of the RBI, will substantially bring down the number of defaulters reported to Cibil.

Another step that can be taken to reduce the numbers of such “non-real defaulters” is for Cibil and RBI to work on the methodology of differentiating the terminology to be used for reporting  cases where the non-recoverable amount is in respect of credit cards which have never been used.

The persons who are involved in reporting such data to Cibil need to be educated about the terminology used while writing off such amounts in the books of the banks.

This should also include cases where the amount has been reported as written off by banks to Cibil in respect of annual fee or in some cases insurance premium which comes by default with some credit cards.

These measures will help people who have been reposted as defaulter without doing any actual credit default. It will also save Cibil and the banks a lot of paperwork when customers request for corrections. I hope the authorities concerned are listening.

Balwant Jain is CFO,
ApnaPaisa.com, a price
comparison engine for
loans, insurance and investments. He can be reached at balwant.jain@apnapaisa.com