court clarifies that payment aggregators will fall under the category of a payment system

RBI’s extends timeline for compliance by Card Issuers in respect of Credit Cards until October 1, 2022

The Reserve Bank of India (“RBI”), on April 21, 2022, had introduced the ‘Master Direction- Debit and Credit Card – Issuance & Conduct Directions, 2022’ (“Master Direction”) which aimed to provide a thorough set of guidelines to card-issuers on issues pertaining to issuing debit and credit cards, co-branded cards, billing, telemarketing, etc. The deadline for compliance with the provisions of the Master Directions was initially set as July 1, 2022.

The Master Directions have now defined (in transparent terms) the banking entities that may engage in the business of issuing credit and debit cards. The Master Directions allow banks to issue debit cards without requiring any kind of approval from the RBI. However, the Master Directions specify that the banks can no longer force customers to get a debit card and the issuance of the same cannot be linked with any other facility being offered by the bank. The issuance of co-branded cards has also been regulated through the Master Directions. The Master Directions additionally provide that card-issuers can no longer unilaterally upgrade credit cards and/or increase credit limits without the explicit consent of the customer. They have also provided that in the instance any charges are made on an unsolicited card without the consent of the customer, the same will be reversed and an additional penalty twice the charged amount shall be paid by the card-issuer to the card-holder.

The Master Directions have attempted to put-in place a set of requirements to ensure that card-issuers are kept in check and that the interests of card-holders are protected.

In a recent development, the RBI has notified ‘Extension of timeline for implementation of certain provisions of Master Directions – Credit Card and Debit Card – Issuance and Conduct Direction, 2022’ on June 21, 2022 whereby the RBI has extended the timeline for implementation of the following provisions of the Master Directions until October 1, 2022:

  • Card issuers shall seek One Time Passwords based consent from the cardholder for activating a credit card, if the same has not been activated by the customer for more than 30 days from the date of issuance. If no consent is received for activating a credit card, card-issuers shall close the credit card account without any cost to the customer within seven working days from date of seeking confirmation from the customer.
  • Card-issuers shall ensure that the credit limit as sanctioned and advised to the cardholder is not breached at any point in time without seeking explicit consent from the cardholder.
  • No capitalisation of unpaid charges/levies/taxes for charging/ compounding of interest.

The notification has further clarified that ‘the stipulated timeline for implementation of rest of the provisions of the Master Direction remains unchanged.’

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