Banks face stricter rules on credit cards
By Zhang Fengming |
January 28, 2011, Friday
|
Print Edition
Print Edition
CHINESE banks are facing stricter rules on the issuing of credit cards and extending credit facilities to young consumers.
Under new rules issued by the government yesterday banks are banned from issuing credit cards to people under 18 and are required to be prudent in offering credit line to young consumers.
Banks in China have issued 210 million credit cards so far. Credit card-based transactions topped 5.1 trillion yuan (US$775 billion) in 2010. Credit cards are viewed as the second most lucrative retail credit business for lenders by 2013 after mortgages, said McKinsey & Co in an earlier report.
The rules were a response to the emergence of several disputes and lawsuits because some banks had issued credit cards to unqualified students who defaulted on their payments leaving the parents to pick up the tab. Some banks had also issued cards to people who were not able to make payments as they lack the means to do so.
"Rampant marketing and card issuing are the main irregularities in the rapidly developing industry," the China Banking Regulatory Commission said yesterday in a statement on its website.
The new rules ban the practice of charging the credit card annual fee to consumers who had previously signed up for them to get introductory gifts and free bonus points but didn't activate the cards.
Banks are also not allowed to assess a credit card officer's ability by the volume of cards he approved to be issued, the statement said.
In 2009 Shanghai warned banks against offering incentives to reward salespeople to get as many new cardholders as possible to sign up.
Credit cards complaints are among the most frequent heard in the banking industry.
Under new rules issued by the government yesterday banks are banned from issuing credit cards to people under 18 and are required to be prudent in offering credit line to young consumers.
Banks in China have issued 210 million credit cards so far. Credit card-based transactions topped 5.1 trillion yuan (US$775 billion) in 2010. Credit cards are viewed as the second most lucrative retail credit business for lenders by 2013 after mortgages, said McKinsey & Co in an earlier report.
The rules were a response to the emergence of several disputes and lawsuits because some banks had issued credit cards to unqualified students who defaulted on their payments leaving the parents to pick up the tab. Some banks had also issued cards to people who were not able to make payments as they lack the means to do so.
"Rampant marketing and card issuing are the main irregularities in the rapidly developing industry," the China Banking Regulatory Commission said yesterday in a statement on its website.
The new rules ban the practice of charging the credit card annual fee to consumers who had previously signed up for them to get introductory gifts and free bonus points but didn't activate the cards.
Banks are also not allowed to assess a credit card officer's ability by the volume of cards he approved to be issued, the statement said.
In 2009 Shanghai warned banks against offering incentives to reward salespeople to get as many new cardholders as possible to sign up.
Credit cards complaints are among the most frequent heard in the banking industry.
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