Credit Cards ‘issue’ not for consumers’ benefit

Recently, a Mumbai resident approached a new age private sector bank for a credit card to book an online air ticket. She already holds a salary account with the bank. Despite her request for a basic card, she was peddled a platinum version. Shockingly even as the bank executives conceded that her designation did not match platinum card criteria the bank executive actually asked her wrongly to fill a more senior sounding title in the application form. She refused to bluff and ticked for a basic card. Unfortunately, her request was rejected. A former banker says this extreme and unethical practice could be the results of atrocious sales targets slapped on sales executives and outsourced direct selling agents (DSAs). In the race for business quality does not matter. Banks are aiming for trouble.

What is more worrying from a consumer’s perspective is that such a deal is difficult to prove as no written communication is involved. A banking ombudsman official, though, emphasized that even if there was some mischief on the application form, final scrutiny of the applicant’s document would have revealed the irregularity. This might have landed the applicant in trouble. But bankers suppose that the rejection may have to do with some other unspecified reason. This though is just conjnecture and there lies the crux of the problems – that banks are reluctant to tender the exact cause for rejection. The Mumbai applicant, for instance says she wasn’t given any.

This despite a recent July 2008 RBI circular that reiterates an earlier salvo banks should convey in writing the main reason/reasons which have led to the rejection of the credit card applications. In another disturbing instance, a DSA tried to palm off a platinum card again of the same new age private sector bank to a Mumbai media person. He wanted a gold card because it suited his requirements and offered discounts on groceries etc. But a few days later, he received a vague mail saying his application had been rejected. It looked like a computer generated response. The letter did not give out specifics except that the application did not meet bank’s internal credit policy based on a combination of financial and related criteria and statistically determined scores to assess credit eligibility, and also combination of verification credit bureau reports and document verifications. This mail has left the consumer confused about the probable rejection reason and worried that the refusal may affect her future credit chances.

A senior banker who deals in credit cards but does not wish to be identified insists that such a mall is not very vague. A bank will not wish to throw open its internal evaluation criteria for credit. The reasons for rejection could range from low income, not owning a house, living in a wrong locality to default on previous loans. But if a customer is on the Cibil (negative credit repayment history) list, bank may clearly communicate. Cibil or Credit Information Bureau (India) collects, disseminates, an individual’s credit data across financial institutions.

Now, in case of card issuing bank rejects an application, neither RBI nor the ombudsman can intervene. It is the bank’s prerogative. It exercises due diligence as a credit card is much more risk. It is a free loan for 50-52 days. Meanwhile Delhi headquartered National consumer Helpline a project supported by the ministry of consumer affairs advises consumers ask for and retain a written proof like a receipt of application. There have been instances where an application is rejected after an applicant has shared his important documents, including PAN card. The documents could be misused.