i am out 52

Bank Negara’s chaffy credit card guidelines SM Mohamed Idris Sep 28, 05 1:50pm



What is the use of a guideline if nobody follows it? Or if it cannot be enforced? This is the problem with Bank Negara Malaysia’s (BNM) Guideline on Credit Cards, which came into effect on March 2003. The guideline looks good on paper but it appears that nobody, including BNM, takes it seriously. After all, BNM even allows a bank to be exempted from the guideline. For example section 8 of the guideline says that the bank “shall require their cardholders to make a minimum monthly repayment amount of 5% for the total outstanding balance.” Yet in one foreign bank’s Payment Break campaign, the cardholder did not have to pay anything outstanding (not even the minimum 5%) on his monthly statement and the balance would be carried forward to the following month’s statement. We brought this ‘Payment Break’ to BNM’s attention. BNM’s reply came as a shock. The bank concerned had been given permission by BNM to carry out the campaign. Also under section 14 of the guideline, a credit card issuing bank should conduct a consumer awareness and education programme on a continuing basis, which shall include amongst others “advice on prudent use of credit cards” Yet banks have been carrying out various types of campaigns to do the exact opposite which is to get cardholders into debt. Under another foreign bank’s ‘Smart Balance’ campaign carried out in May and October last year, credit cardholders who chose to pay interest instead of settling their monthly statement account in full would receive gifts. As encouraging cardholders to get into debt can no way be considered ‘prudent use’ of the card, we enquired what action would BNM take against the bank for introducing ‘Smart Balance’ not once but twice in a year. BNM did not reply but the bank concerned did (even though we had not written to it), denying that the campaign was intended to encourage cardholders to get into debt. Who decides whether the guideline has been broken - the bank involved or BNM?
ecently a local bank sent out cheques of RM5,000 to its cardholders. Once the cheque is deposited into the cardholder’s savings or current account a handling fee of RM150 is charged. The bank will also charge interest of 18% per annum on the outstanding balance if the cardholder does not settle the monthly statement in full. Again, is not sending out unsolicited loans going against the guideline? Most importantly, does BNM have the power to enforce the guidelines even if it wishes to do so? Or do the terms and conditions of the credit card contract render the guidelines useless? In one case, a credit card was stolen and by the time the report was made (about two hours later) a fraudulent transaction had been carried out. Subsection 13.2 of the guideline clearly states that the “the cardholder’s maximum liability for unauthorised transactions as a consequence of a lost or stolen credit card shall be confined to a limit specified by the issuer of credit card, which shall not exceed RM250, provided the cardholder has not acted fraudulently or has not failed to inform the issuer of credit cards as soon as reasonably practicable after having found that his credit card is lost or stolen”. We argued that given the circumstances of the case, the bank had been informed as soon as “reasonably practicable”. However, the bank insisted that the cardholder is responsible for the transaction because according to the credit card agreement, all transactions will be borne by the cardholder until the bank has been informed about the loss of the card. We enquired from BNM the circumstances under which the guideline would apply and the cardholder will only have to pay RM250. Unfortunately BNM’s reply was to ask the complainant to approach the Financial Mediation Bureau if he was unhappy with the bank’s decision. If the credit card guideline is never going to be enforced or cannot be enforced, it is redundant and BNM might as well do away with it. To protect consumers, the proposals in the guideline must be incorporated into the Banking and Financial Institution Act 1989. However, our concern about BNM guidelines extends beyond that of credit cards.
BNM has issued many guidelines. Examples include the Guidelines for Consumer Protection on Electronic Fund Transfers, the Guidelines on Duties and Responsibilities of Directors and Appointment of Chief Executives and Guidelines on the Credit Limit to A Single Customer. Are the banks abiding by these guidelines? What happens if they do not? How often are exemptions being given? The public deserves answers from BNM The writer is the president of the Consumers Association of Penang.

This is too many cooks spoilt the soup. In this case too many guidelines but nobody really enforces it by BNM. It is always very smart on paper on the guidelines yet when action is required it runs opposite. The Finance Minister never says as much as to alleviate the problems face by the man on the street. You can just see the very small print....you need a magnifying glass to see it....so beware of all the gimmicks indirectly sanctioned by BNM!