Tougher credit card regulations looming for Chinese banks

Tracy Li
Industry watchdog says misleading marketing and induced overuse have greatly infringed consumers' rights, and it is seeking public opinion on new policies.
Tracy Li
Tougher credit card regulations looming for Chinese banks

Chinese banks will face tougher credit card regulations as misleading marketing and induced overuse have greatly infringed consumers' rights, top industry watchdog said Thursday.

Some banks have weak service awareness and inadequate risk management due to blind expansion of their credit card business, said the China Banking and Insurance Regulatory Commission in a notice.

The watchdog said it will solicit opinions from the public till mid-January on new policies.

To standardize the credit card business, the notice requires banks not to directly or indirectly use the number of cards issued, the number of customers or market share as single or main assessment indicators.

Banks will not be allowed to issue new cards if the proportion of long-term inactive credit cards exceeds 20 percent of total card issuance.

Long-term inactive credit cards are those with no active transactions by customers for more than 18 months consecutively, with current overdraft balance and overpayment being zero.

While calling for lenders to reasonably set the maximum credit limit for a single customer, the watchdog also orders banks to specify the minimum and maximum amount of installment business.

Installment business should not be confused or bundled with other credit card business contracts or agreements, the notice added.

Banks are summoned to strictly fulfill the obligation of prompting or explaining the terms and risks of collecting interest, compound interest, fees and liquidated damages when entering into credit card contracts with customers, and to show customers the annualized interest rate in an obvious way.

Except for cash withdrawal business, the total amount of interest and fees charged to customers who default or fail to repay the loan within the time limit shall not exceed their corresponding principal, according to the notice.

For installment business, banks are ordered to clearly display on the front page of the contract all interest and expense items, annualized interest rate levels and calculation methods.

And interest, instead of fees, shall be uniformly used when showing the cost of funds by installment business to customers.

Huaxia Bank, a national joint-stock commercial bank, has just been criticized by regulators for forcing customers to accept cross-selling products while applying for credit cards with the bank.

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