From the New York Times...Americans should take the same stance.
In India, Credit Card Terms Prompt Indignation
By HEATHER TIMMONS
Published: July 6, 2007
NEW DELHI, July 5 — Arigit Sengupta, a hotel manager in Bangalore, swears he is never using a credit card again.
After charging about 30,000 rupees ($743) to his card and paying his minimum balance on time, he said he wound up owing his bank more than three times that amount. “The kind of interest they charge, not even a chartered accountant could understand,” he said.
Local and foreign banks are aggressively peddling credit card accounts in India, where a fast-growing middle class with disposable income has created the ideal card customer base.
But converting Indian consumers to plastic has proved more difficult than expected.
After years of hard selling, less than 4 percent of India’s adult population has a credit card, one of the lowest rates in the world. And at a time when foreign banks like Barclays continue to jump into the business, an organized campaign against cards is building.
Credit card rates and fees frustrate borrowers around the world, but Indian consumers have something special to complain about. Interest rates average more than 30 percent, and can soar to over 50 percent, while charges tacked on for late payments are sometimes a hefty 20 percent of the overall balance.
The result is vocal and heated criticism from card holders, consumer advocates and the government. They accuse the banks of levying unfair fees and nuisance charges and of providing miserable customer service — an odd complaint from a country that services many of the card accounts for the rest of the world.
“These banks are cheating the public,” said C. V. Giddappa, general secretary of the Credit Card Holders’ Association of India, a nationwide consumer group. Mr. Giddappa’s organization estimates that Indian consumers are paying 16.4 million rupees a day (more than $406,000) in unfair charges, and is agitating for a debt-free India by 2020.
The government’s trade watchdog, the Monopolies and Restrictive Trade Practices Commission, has started an investigation of card-selling practices of banks including Citigroup, HSBC and the local banks Icici and HDFC. The commission has the power to fine companies and limit their business dealings.
All the banks involved say they have followed all appropriate trade practices and are cooperating with the requests for information.
The Reserve Bank of India is also concerned. On May 7, the Reserve Bank sent a letter to all commercial banks warning about “usurious” interest rates, asking them to make sure costs to the borrowers were justifiable. The ombudsman’s office at the bank said it received 3,700 consumer complaints about credit card lenders from January 2006 through May of this year.
Newspapers regularly run articles telling consumers how to cancel their cards, and some frustrated credit card users simply stop paying their bills.
Bankers estimate that about one in 10 credit card accounts in India is charged off, meaning that card holders have fallen so far behind on payments that the accounts are not ever expected to be paid. In the United States, about one in 25 accounts is charged off, according to Standard & Poor’s data; the ratio is similar in other fast-growing Asian economies like Thailand.
“My balance never came to an end,” said one such borrower, V. P. Ullas, a branch manager at a finance company who initially charged about 15,000 rupees worth of clothes and furniture to his Citigroup credit card. He said that he refused to give the bank any more money after watching his balance climb to 100,000 rupees with fees and charges, and paying many times the value of his original purchases.
Mr. Ullas said that he usually paid his bill promptly but that his interest rate increased to 55 percent, from 24 percent. “I have paid much more than what is due to them,” he said. Citigroup said that it could not comment on individual accounts, but that customers who paid their minimum balance on time would not have an escalating balance.
In addition to complaining about high fees, customers say that sales agents make false promises about no-fee cards, that payments are not recorded, that bills do not show up and that problems are resolved slowly or not at all, leading to more fees. Banks lure in customers and then “start squeezing your blood,” said Mr. Giddappa, of the credit card holders’ association.
Lenders say they need to charge high rates and fees in India because of the market’s uncertainties. There is no robust credit bureau that tracks borrowers’ payment history, nor can borrowers be readily tracked by identification data, like Social Security numbers. When people move, they are untraceable, the banks say.
“Many of these issues arise because of lack of customer awareness,” said Citigroup’s head of cards in India, T. R. Ramachandran. “They are first-time borrowers, they are unfamiliar with carry-forward balances,” he said. Customer education, industrywide, “continues to be a challenge,” he said.
Citigroup, which has 3.3 million accounts in India, says it gives new customers plain-language information on terms and conditions, provides 24-hour telephone customer service and sends text messages to mobile phones days before bills are due. Terms are also on the back of every bill.
Dheeraj Dik**bleep**, head of cards in India for HSBC, a major card company in India with 2.5 million customers, said that details on HSBC’s policies were available on the Web or in branches. The bank is committed to resolving complaints in seven days, he said.
But false charges and disputed fees can turn even the most diligent borrowers into nonpayers. Ashesh Razdan and his wife, Monika, residents of Delhi who work in the information technology and pharmaceutical industries, respectively, have been battling what they contend is a fraudulent charge of 17,000 rupees on their HSBC card since June last year.
They always paid their bills off completely and on time, Mr. Razdan said, but after dozens of faxes and calls to the bank disputing the charge, they have let the HSBC account lapse.
“How many times am I supposed to call customer care?” asked Mr. Razdan.
The repercussions for borrowers like Mr. Ullas and the Razdans who stop paying bills are unclear. Disputes between banks and borrowers are generally settled out of court.
But many card customers, like Mr. Sengupta, the hotel manager, who is negotiating for a settlement with his bank, Icici, pledge never to rely on plastic again. “I’ve learned a lesson,” he said.
my imagination on that word is probably a lot funnier than what it really is,.