Credit card complaints on top position in complaints registered

As per the annual report on ombudsman schemes released by the Reserve Bank of India (RBI) there has been increase in complaints about credit cards. According to report credit cards complaints have formed a major part of the grievances received by banking ombudsmen in financial year 2008 (April-March).

In 1995 RBI introduced the Banking Ombudsman Scheme to provide an ‘expeditious’ and ‘inexpensive’ forum to bank customers for resolution of their complaints relating to banking services. The grievances are related to the issuance of unsolicited credit cards and unsolicited insurance policy to the recovery of premium charges and annual fees, despite the cards being offered for free, and from the issuance of loans over phone, disputes over wrong billing and settlement offers conveyed telephonically to non-settlement of insurance claims after the demise of the card holder.

A general aspect of the customer complaints across the board was the problem in admittance of credit card issuers and poor response from call centers. Furthermore, the central bank report on ombudsmen scheme stated the card issuers often ascribed their mistakes in billing, accounting and reporting to technical snags. However, the report claimed on pursuing the complaints with card issuers, the charges debited were reversed in most cases without exception.

The reason behind increase in the number of complaints is misrepresentation and misleading information provided by direct sales agents as well as non-fulfillment of such oral promises made by these agents or bank officials at the time of marketing of products. However the complaints relating to failure on commitments made were placed at second place among those received at the offices of the banking ombudsmen.

The cases handled by ombudsmen disclosed that bankers are required to deal with customers in a more transparent manner, especially in making them aware of the terms and conditions of the sanction and the specific suggestions associated with them right at the beginning. The report stated rationality in product pricing by banks and their dealing with default situations are other areas which require added focus, as complaints on these fronts continue to come to the ombudsmen.

During FY08, ombudsmen received 47,887 complaints as against 38,638 received in FY07, therefore there is a rise of 24%, and around 89% were disposed of the total complaints (84% last year), with only 11% carried forward the next year.

Christmas sales increased consumers redeemed credit card points

Christmas celebration is the last festive fervor of the year therefore the consumers are busy redeeming their plastic points accumulated over the year, to take advantage of discounts and freebies at malls. Although retailers said sales volumes were not significantly larger than last year.

Consumers are able to redeem their credit card points after banks start offering a bigger basket of tie-ups with stores, restaurants and other retail destinations.

Consumers collect points on the use of their credit card. Each time he or she uses card to shop at a retail store that offers such schemes. Later on these points can be redeemed at the same store, or at other stores that have agreements with the card-issuing bank.

Over the years use of credit and debit cards has risen. For instance, the number of debit card users has gone up from 65 million to 100 million in two years. A banker told consumers spent 15-18% more on their credit cards this year in October (marking the beginning of the festive season) than they did in same month last year. He further said that the use of credit or debit cards on weekends continues to be high.

Ganesh Raman, head-marketing, Megamart, said: ``The trend of people using largely plastic money continues. About 60-65% of the purchase transactions are settled through cards at our 130 stores.'' However, he adds, there hasn't been a significant spurt in consumers redeeming points specifically at the year-end. ``People usually redeem points after 2-3 cycles of purchases,'' he said.

According to Damodar Mall, group customer director, Future Group, ``generally, people spend more on credit cards at modern retail stores, given the convenience factor and other benefits. In value store formats like Big Bazaar, credit card usage is to the extent of 35-40%, while in stores like Central, it is higher at about 45%.''

Mall reported that there is no specific shift in trend of consumers redeeming accumulated points, but he added that co-branded credit cards and shopping festivals had lifted shoppers' sentiments.

The Future group has launched the Great Indian Shopping Festival, which awards customers one ``sone ki chidiya sticker'' on every purchase of Rs 500. The more one amassed, the better the freebies one is entitled to. Similarly, Megamart's ``Smartone'' program provides special offers, previews of new products, and gifts. A shopper earns one point for every Rs 100 spent, and each point is worth 70 paise.

``On average, our store offers 30-35% discount on all Arvind and non-Arvind brands. However, during festival times, discounts go up to 50%. During special occasions, our bargain offers include buy-one-get-one-free,'' said Raman. He added that Megamart has seen a 10% to 12% decline in footfalls at his value-for-money stores, although he said it was not significant, considering the severity of the economic slowdown. ``On the other hand, we're attracting new customers who are shifting from expensive or premium apparel brands to economically priced ones,'' he said.

Credit card fraud busted housewife arrested

Kanika Buddhiraja (27) staying in Rana Pratap Bagh, to her neighbors is fashionable housewife. She did her schooling in a Mussoorie convent, graduation from one of the best colleges in Delhi, before getting married to a textile merchant.

She did Rs 5 crore e-ticketing frauds along with the Thailand-based mother Karampal Kaur Shetty, Kanika the family had engineered over the last one year. The two, along with Kanika's brother Sarabjit Singh evidently started this "business'' two years ago soon after Kanika's father died. Delhi police sleuths along with their counterparts from Kolkata exposed the racket on arresting three persons from that city. On interrogating the accused, Kanika name came forward and she was arrested from Delhi.

Neeraj Thakur, DCP (crime and railways) told, the gang used to obtain airline and railway tickets online using credit card details allegedly acquired by Karampal, a Thai citizen, from her contacts. Police told in Thailand, a "packet'' of 400-500 credit card details can allegedly be obtained for 20,000 Bahts, easily..

"The gang took cash from customers, promising them cheap tickets. When the concerned airline or the bank tried to realize the money from the credit card owners, the card owner would threaten legal action for being charged for a journey they never undertook,'' said Thakur.

As per information of crime branch sleuths, credit cards of over 40 Indian and foreign banks were misused by the gang. In fact gang used one American Express premium card for buying 700 tickets over a period of two weeks.

According to Thakur, the affected airlines included Deccan Air (now Kingfisher Red), Kingfisher Airlines, Spicejet, Indigo and Air India. Indian Railways did not escape too.

Amid the three arrested from Kolkata is Naeem Ahmed (24). An officer informed "He is the one of the main brains behind the racket. He bought the tickets and his associates sold them to customers at heavily discounted rates''.

His co-conspirator Shahid Iqbal (25) owns a travel agency by the name of Chand Travels in Kolkata. He used to sell the tickets prepared by Naeem to his customers along with Feroz Alam (23) who runs another travel agency by the name of Janta Travels.

Kotak Bank to enter in corporate credit card biz

Kotak Mahindra Bank is planning to launch a corporate credit card product and will also be entering into partnership program for launching co-branded credit cards by April 2009.

Subrat Pani, Business Head (Cards), Kotak Mahindra Bank, in an interview told Business Line, “We are looking at entering into partnerships in the high-end segments in airline, retail and entertainment like movie or dining chain. An announcement in this regard is likely by January and launch by March or April”.

Earlier this year bank had entered the credit card business by launching two Visa Gold Cards, a Visa Platinum Card and a Visa Signature Card to complete the range of financial services from the Kotak Group.

Pani informed that since the launch seven months back, the bank has issued more than 1 lakh cards and is on course to meet the first year (April 2009) target of 2,50,000 cards.

He also added that yet the default rates have not started. “Typically, a write-off or a default happens after 180 days of consecutive non payment. So it is too early to comment on the default rates,” Pani added.

As per information provided by him, though there is no negative growth, the industry will not witness the compound annual growth rate (CAGR) of 38 per cent observe in the last five years.

“Last year, we saw a growth rate of 40 per cent when around Rs 58,000 crore was spent on credit cards. But this year, as compared with last year, the growth is likely to be around 24-25 per cent and end at around 22 per cent, which is likely to come down further to around 12 to 15 per cent next fiscal (2009-10),” he said.

However Pani, added that the industry growth will probably get rebound in 2010-11 to around 30-35 per cent when the spending might be between Rs 90,000 crore and Rs 1,00,000 crore.

Giving details about the usage pattern, he said that at present, the average spend per account per month stands to about 2.25 times more than the industry average (Rs 4,000) spending through gold cards.

Speaking about the future of the credit card business, Pani explained that in the next two years, the industry will be strictly taking care in terms of the kind and quality of customers to be taken on the portfolio.