Credit Card – Get Ignorance Is Bliss NOT ALWAYS!

Recently I read about the experience of a columnist with one of the business dailies as to how a credit card was issued to her while opening a savings account and the ordeal she had to go through after that. So what happened to her and why?  As confessed by her in her weekly column, it happened because she just signed on the dotted line of the application form for opening the savings bank account instead of filling up it herself and handed over to the bank’s representative.

This act is not an exception but more of a rule, all of us do that. Normally representative of the bank comes to your place for helping you get a savings account opened in his bank and simply asks you to sign the blank form and leaves after collecting the supporting documents. He insists that he will fill up the form without you having to waste your time on such a trivial mater. That time you appreciate this gesture, only to repent later as happened in case of said columnist. So, you know now that to what extent this practice of signing on blank form exists in the real world, when the person who is a columnist of a business newspaper signed the blank form for opening a savings bank account. So, what to say of the ordinary mortals!

It is not that the unsuspecting customer gets an unsolicited credit card but sometimes he also gets that unwanted insurance cover for which premium is charged or for fraudulent billing in the first credit card statement. Since a lot of people do not really use the credit card, they just do not bother to act further after having received the unsolicited credit card. As the customer does not use such cards hence the banks do not receive the money of either annual fees or insurance debited, the banks in due course write off the balance outstanding in respect of such customer. This action of such write off is reported by banks to CIBIL as default by such customer and the horror story unfolds in due course to the customer when he applies for some loan.

We at Apanpaisa receive a lot of queries from the readers about their name appearing as defaulter in the records maintained by CIBIL. Majority of them reported as defaulters in the CIBIL have some or the other issue related with credit cards only.

Due to such incidences of issuance of credit card to an unsuspecting customer who does not know what he is signing on, a lot of genuine persons are deprived of the credit facility offered by banks like loans. The situation becomes grave in specific cases where a person has never borrowed any money, makes down payments towards purchase of  a property or a car hoping that for balance he will get the loan from any bank or financial institutions based on their income eligibility parameters. The real shocker comes when bank informs that their name is appearing as defaulter in CIBIL record.

Such customers have no reason to believe that for a small act of just believing the bank’s representative in signing on the blank account opening form will lead to incessant ordeal and make them run from pillar to post. More so the dream of owning a house or a car also gets shattered. This leads to big embarrassment to the unsuspecting customer as he is not able to arrange such huge funds for payment of the balance money. It is when he digs the record only to know that price, he is paying for opening the bank account and thanked the bank for sending him that credit card. As happened in case of the said columnist.

There are plenty of cases like these where people have suffered due the single reason of the bank bundling the credit card with account opening form. Banks probably do this to expand the customer base and to ensure that the customer does not go to their competitor. Almost all private sector banks resort to such practice without realizing what hardship it causes to the customer who does not understand the ramifications and implications of signing on simple account opening form.

In order to help such customers who are not defaulters in real sense of the term, I would suggest that RBI bans banks from bundling other products with the account opening form. A single step like this on the part of the RBI will ensure that the number of defaulters reported to CIBIL come down substantially.

The other step which can be taken to reduce numbers of such non real defaulters, the CIBIL and RBI can work on the methodology of differentiating the terminology to be used for reporting of cases where the non-recoverable amount is in respect of a credit cards which have never been used.

The persons who are actually involved in reporting of such data to CIBIL need to be educated about the ramification of terminology used while writing off such amounts in the books of the bank.

This should also include cases where the amount has been reported as written off by banks to CIBIL is in respect of annual fee or in some cases insurance premium which comes by default with some of the credit cards.

These measures will go a long way in helping lot of innocent people who have been reposted as defaulter without doing any actual credit default. These will also save a lot of cumbersome paperwork which the CIBIL and banks have to do when the requests for corrections are made by the customers.
Hope concerned authorities are listening!