Is the person who has overextended credit a candidate for sympathy if he means well? He wants to pay back the outstanding amounts against his multiple credit cards, but what if he has just been fired from his job and cannot make his multiple credit card payments? Do you castigate him, telling him that he made the bed, he must lie in it? If that is so, does your lack of sympathy extend beyond the fact that recovery agents came to his house when he wasn’t at home and threatened his wife and child?

If you are the sympathetic kind (especially if you also have been in a similar jam) would you:

1. Tell the man that recovery agents are not allowed use force on borrowers or speak indecently to him or his family?
2. Tell the man that if he doesn’t want to speak to the recovery agent, the agent has to respect his wishes and withdraw?
3. Point out to him the RBI stipulation that “The bank and their agents should not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude the privacy of the debtors’ family members, referees, and friends, making threatening and anonymous calls or making false and misleading representations.“?
4. Point him to the Banking Ombudsman site www.bankingombudsman.rbi.org.in where he can lodge a complaint?
5. Point out to him that his best option would be pay off the entire amount. And then give him tips on how to do it - apply for a loan against property, stocks, insurance policy, or jewelry? But that he should try his best not to go for a settlement?
6. That there are credit counseling agencies, such as ICICI bank’s Disha, that exist for the very purpose of helping people like him?
7. All of the above
8. None of the above

Here are some credit counseling agencies:

• Abhay (Bank of India), 61 A, Sadanand, 1st Floor, Above Bank of India Branch, Gokhale Road (north), Dadar (West), Mumbai- 4000 028. Call 022-24221843.
• Disha (ICICI Bank), Prince Apartments, Ground Floor, Karani Lane, Ghatkopar (West), Mumbai 4000 028. Call 65971815/86/87. Visit www.dishfc.org
• Union Mitra (Union Bank of India), Union Bank Bhavan, 239, Vidhan Bhavan Marg, Nariman Point, Mumbai- 400021. Call 022-22896502.

Answers:
Correct answer - Option 7
Incorrect answer - Any other option or combination of options
So incorrect that it scares me! - Option 8

A fraud transaction was made on the internet through my HDFC Bank credit card. I got my card blocked immediately. My card showed a debit balance for 1 year. A replacement card was issued by HDFC Bank to me, after reversal of the transaction amount and charges. However, I am not able to get new card from other credit card companies because of my name in defaulter list (CIBIL/ Stayam’s Defaulter list). How can I get a new card and remove my name from defaulter list?

Know your rights as a credit card customer. Because, it is not just that your payment record is independent of anything else. Your payment record can affect your financial planning, such as loan applications.

Consider the consumer who has been pristine in keeping up card payments, without defaults and on time. This person has a personal loan as well which he has been exemplary in keeping up with EMI payments. Now, if this person were to default on just one payment, his credit rating goes for a toss. The next credit card he applies for, nine out of ten times he would be rejected as being a defaulter.

Credit rating agencies do not capture the accent of defaults. One-off defaults are given the same weightage as serial defaults. Which means, in the above-mentioned example, the guy is on par with the slacker who has taken a personal loan, defaulted multiple times on his repayments and is waiting for divine intervention or daddy to get him through to safe ground.

The sad part is we cannot do anything about this. But there is an indirect way of dealing with this. Always be aware that you are well within your rights to know the reason why your credit card application was rejected. The RBI, on 24 July 2008, has issued fresh guidelines for the credit card issuers that the issuers should not reject a credit card application without assigning reasons in writing. So if the bank refuses to give a reason for the rejection, you can and should approach the Banking Ombudsman (www.bankingombudsman.rbi.org.in)

This is a strange notion for most of us who think of “trust” only in the context of institutions or people (banks and other companies) with whom you deposit your hard earned money. After all what do you care whether the bank from whom you borrow is trustworthy or not. After all it is they who have to recover money from you and it is they who should be worried whether you are trustworthy and not the other way around. I was very much a part of this school of thought till a few months ago. But some recent events that affected me personally have forced me to rethink.

Incident Number 1

I had signed as a guarantor for the education loan taken by my brother from a leading housing finance company (they also have a relatively lesser known education loan program) to fund his MBA program at the prestigious Indian School of Business (ISB), Hyderabad. This education loan did not require any repayment (either of interest or principal) during the first 15 months. Now comes the twist. Towards the end of his one year program my brother informed me of a problem with the education loan. He informed me that a lot of his fellow students had taken a loan from the same institution. It seems that the “systems” of that institution could not handle the repayment holiday built into the structure of this education loan (probably since the “system” had been built for “home loan” and not “education loan”) and hence the system continued to generate bills for the interest month after month for the interest accrued on the loan amount (even though it was not payable but was only to be accumulated). Since the bills were generated they showed up as overdue as they were not paid (obviously since the education loan agreement clearly provided for the payment holiday). This then got reported as a default to the credit bureau (see this article titled

Do you want to get married? Pay your bills on time for what is a credit bureau and its vital effect on our lives). It seems that a loan request of another student’s guarantor had been turned down due to this “default”. I have always understood the vital importance of a good credit record and have taken great care to maintain a spotless repayment record. Hence I was shocked by this. Fortunately my brother and his fellow affected students (with a lot of help from ISB) took up the matter strongly with the lender. Given the clout of ISB the lender took these complaints seriously. They promised to officially inform the credit bureau of the “system” error and ensure that the so called “default” was wiped off the credit bureau records for both the student as well their guarantor. In practice however they just got the credit report of my brother. They dismissed the requirement for my credit report by saying that their “systems” showed that they had not reported the “default” in my account to the credit bureau and hence there was no requirement to get a copy of my credit record. Given that my faith in their so called “system” was zero, we insisted that they get the credit report to prove their point. They were very reluctant and only after some heavy duty follow up we at last managed to get the credit report. My impression was that they were reluctant to get the report because of the cost of Rs. 50/- or so involved in getting the report from CIBIL. Given the fact that the entire mess was created due to the fault in their systems the casual manner in which they treated their own promise was scary and disgusting at the same time. Fortunately the credit report itself was clean of any issues but I had spent a good four weeks being tense.

Incident Number 2

This happened just around the same time as the first incident above was unfolding and I was yet to receive a copy of my credit report. To test out if any adverse record had been included in my credit report, I decided to apply for a credit card online with a leading foreign bank in India which offers a completely online process for credit cards with no requirements to submit any documentation or any verification calls. Imagine my horror when for the first time in my life my credit request was turned down. I was now sure that my credit report had been tarnished beyond repair. However very soon I did get a copy of my credit report (see first incident above) and it was clean as a whistle. So now I was left staring at another mystery. Why was my credit card request turned down? I got the answer soon enough after a few follow ups with the concerned bank. It seems that as per their records the bank had already issued the credit card I had requested a few years ago and as per their records I continued to hold that credit card. So naturally they could not issue me the same credit card again. They helpfully suggested that I could apply for any other credit card from their stable. What left me scared was that the bank showed a credit card as being owned by me whereas I never had that credit card. I wrote to them disclaiming any responsibility for any dues on that so called credit card held by me. I am still running scared if somebody will misuse this so called credit card and I will be saddled with the resultant impact on my credit report.

Incident No. 3

A bulky open envelope of my home loan lender (one of India’s leading private sector bank) with my name and address on it was handed over to the watchman of my building by a passerby who claimed to have found it on the road near my house. The watchman promptly delivered the envelope to my home. When I examined it in the night I was horrified to find the complete loan papers of my loan against property account (fortunately only Xeroxes and not originals). It included all my income tax returns and bank statements as well. What’s more there were similar papers for 7 other borrowers of the same bank. What were they doing in a envelope with my name on it? Who in the bank had access to these papers and what were they doing on the roadside? Did anyone in the bank miss those papers at all? What would have happened if the papers would have fallen in the wrong hands? Clearly the bank’s operational processes were treating our confidential documents in a completely cavalier fashion.

The common factor among all the 3 incidents above is operational failure. So what makes the lenders across sectors (the above 3 incidents involved an housing finance company, private sector bank and a foreign bank – and I have no reason to believe that the other kind of lenders are better at operations than these 3 are) so sloppy in operational matters. The biggest reason of course is that operations preparedness has lagged the appetite of lenders for making loans. The second reason is that they know they can get away with it with the worse that can happen to them being a rap on the knuckles. There are no laws governing the bank’s obligations to its consumers. At most we have RBI regulations and guidelines. None of them lay down the compensation payable to consumers by the lenders if they violate these guidelines. As these are not laws passed by parliament only the regulator can take action against the lenders for violation of such regulations/guidelines. The consumer can only complain to the regulator and wait for them to take action. Approaching consumer courts is time consuming (though not expensive) and most consumers are loath to use this route. In any case even where the courts hold that there is a deficiency of service on the part of the lender, the compensation provided is peanuts and has no punitive impact on the concerned lender. In more developed countries if the court rules in favour of the consumer on a similar issue it will perhaps award substantial damages to make sure that the lender will take all the necessary corrective steps to avoid a similar incident happening in the future.

So is there no hope for Indian loan consumers. That is not really true. A small beginning has already been made with the appointment of the banking ombudsman (which unfortunately does not cover housing finance companies and NBFCs) which is already having a positive impact. The Credit Information companies regulation act (which governs credit bureaus) with the rules made under it provide that banks will exercise due caution in reporting the correct figures to the Credit bureau. Unfortunately even this act does not lay down any remedy that the consumers can pursue directly against the lenders for wrong reporting of information (an example being incident 1). However the regulatory environment is now far more sensitive to these concerns and we should see more gradual progress in ensuring that lenders adopt the required operational procedures that will minimise the chances of the kind of incidents that Ii have narrated above. Off course if a smart politician gets hold of this issue (and has the patience to understand its wide ranging impact) it will not be long before we see parliament enacting laws on this. After all everybody loves to hate the lenders (though they serve a most useful function) and they will be a soft target for politicians to score brownie points with their middle class voters in an election year.

Harsh Vardhan Roongta is CEO, Apnaloan.com Services Pvt. Ltd.

I bought a car insurance policy through my credit card company. Amex gave me a car insurance policy through ICICI Lombard and this insurance amount was charged to my card in 12 monthly interest free installments. I did not receive the insurance policy so a month later I requested the bank to cancel the same. I have cancelled the insurance policy in question and bought another one. However, the problem is that I am being charged (on my credit card) with the installment for the premium. I have sent numerous letters and requests to Amex as well as ICICI Lombard, but there has been no response so far. What do I do? I don’t want to pay these charges and I am getting billed extra interest charges, service tax and many other such charges.

Any disputed charges from the credit card company, please raise a formal dispute and get an acknowledgment. Disputes raised on the telephone have no legal standing. Instances where customers act on assurances on the phone from a bank’s helpline abound. Few of them ever have a happy ending.

Most cases of disputed charges are because of fraudulent transactions. Credit card companies gear themselves to ensure that it becomes well nigh impossible for even a well-meaning customer to find a solution to such issues. There are many instances where the customer has been asked to send in a dispute letter; the customer sends it and the company says it hasn’t received it. The customer faxes it, the company still claims to not have gotten it. The customer mails the scanned copy of the fax, still nothing.

The RBI states that “the persons in whose name the card has been issued cannot be held responsible for the same (misuse of credit cards by other persons).” If the bank still does not rule in the customer’s favor despite him/her not having incurred the charges, the customer should immediately complain to Banking Ombudsman. Details are available on www.bankingombudsman.rbi.org.in.

As more and more credit cards become available, they are increasingly displacing currency and checks to make everyday purchases. Presently, many people receive and use numerous credit cards. Approvals are easily obtained, and can even be provided instantly over the Internet.

Getting that first credit card might be a little tiresome. Once you have your first card, subsequent cards are easier to attain. Ensure that you are prompt in your payments on your first card for the first six months or so. Now, when you apply for another card at another bank (or the bank calls you asking you if you want their credit card), you have the upper hand – you can ask them to give you a credit limit that is appreciably higher than your first card. Repeat process for subsequent cards. You will now have a good consolidated credit limit.

Now how can you use these multiple cards to your advantage?

• Taking advantage of differing billing dates: Your different cards will in all probability have different billing dates. You can actually use this to your advantage. For instance, let’s say you purchased a TV on the 16th of this month. You have two credit cards, the first with a billing date of the 15th of every month and the second with a billing date of the 2nd of every month. Here, if you use the first card to pay for the purchase, you would have one full month before your next bill is generated. If you use the second card, your purchase will be reflected in the bill generated on the 2nd of next month, effectively giving you just 15 days before you have to start thinking of paying the dues.

• Balance Transfer facilities: It is one of the best ways you can get out of debt. This is because any outstanding balance you have on any credit card is wiped out by transferring necessary funds from another card. You can avail this service on the card that is willing to give you benefits such as a lower interest rate on the balance transferred or a freeze on interest for a stipulated period, say 3 months. For instance, let’s assume you have 2 cards, A and B. Card A has an outstanding of Rs. 30000. Card B is willing to give you a balance transfer facility that will allow you to transfer the Rs. 30000 to card A. On the Rs. 30000 transferred, Card B will not charge interest for the first three months, and thereafter it undertakes to charge interest at 0.5% less than what you would have had to pay on card A. Taking the facility will give you two advantages - interest-free payments for the first three months and subsequent payments that will be lesser than what you would have had to make on card A.

• Segregation of purchases: By segregating personal and business-related purchases, it provides users with a monthly or annual record of all such purchases. This will come in especially handy when you need to calculate business expenses. Keeping one card exclusively for business expenses means that you will have all business expenses appearing in that card’s statements. This reduces the need of hanging on to every bill (and the real danger of misplacing them).

• Status symbol: Whether you are taking a client out on a business-related outing, or making a purchase on your own, paying with multiple cards can show you in more advantageous light, as a person of exalted economic standing.

• Convenience: All merchant outlets have tie-ups with one or the other payment network (Visa, MasterCard, American Express, Diner’s) or all of them. Some merchant establishments may not accept credit cards of one payment network or the other; having multiple cards, you have a choice of paying up with the card that works.

There is a flip side too, unfortunately. Or, the disadvantages of using multiple cards:

• High risk: If a wallet full of cards is stolen, the perp has more opportunity to spend the user’s cash, or steal his/her identity. Chances are that the user, having trouble remembering all those PINs, might do something daft such as writing the codes down or making the PINs the same for all the cards.

• Temptation: Having many cards means more credit to spend. Increased spending but no increase in income.

• Multiplying interest: If multiple cards are left with outstanding balances beyond their special offer periods, interest can easily build up at different rates.

• Budget woes: The biggest disadvantage of multiple credit cards is that it encourages people to spend money that they don’t have.

• Reward points: Cards that offer reward point schemes often need frequent usage to make these rewards useful or viable. Any benefits gained will undoubtedly be wiped out by interest charges if the full balance is not paid off each month.

Kairav Shah is a Certified Financial Planner working as Vice-President, Personal Finance at Apnaloan.com Financial Services (P) Limited.

I was using a HDFC credit card issued in Hyderabad. I have been constantly travelling and shifting places as a part of my job requirement. In the meanwhile, I have ended up defaulting, not having made a payment due, even after four months passed by. A couple of months later, the collection agents called me for regarding the payments due. I made the payment promptly. My card is still blocked and I believe they have marked me as a defaulter in the credit bureau. As a result, I am not getting any other credit card. I requested them to unblock the card which didn’t happen (don’t know the reason). I am not receiving any statements from them and I am being told to make the payment due (which is not a fact).

I am charged a hell lot of amount as late fees and all, whereas they don’t care to send me a statement. I have logged a complaint in their website recently and am waiting for a reply. I don’t think this is a fault all from my end. Please advice me how to deal with this and what to do about the Credit Bureau?

I hold a Citibank cash-back credit card. Despite declaring it as a cash back card, the bank never allowed me cash back. The card entitles me to purchase petrol on the card from Indian Oil Company (IOC) outlets without levy of surcharge, yet they levy such charge every time, telling me that the card requires to be swiped from a Citibank swipe machine. Not many dealers in my native place (Lucknow) posses such machines. So, as such, the promise of petrol purchase free of surcharge is non existent. I have to write to Citibank every time I seek a surcharge waiver.

I have a problem in my father’s credit card since the last 2 years and 5 months. This is regarding the closure of a loan taken on the credit card without consent of my father. We represented the problem to the RBI who instructed the bank to take appropriate action. The bank has not responded to their instructions. The credit card is issued by CITIBANK. We also contacted their customer care centre for problem resolution, but there is no response.