Debt counselling

Banks are willing to help cardholders to settle dues.

Ridiculing the way credit card companies function, an American satirist once quipped – ‘Life was a lot simpler when what we honoured was father and mother rather than all major credit cards.’

The remark mirrors the current situation of many credit cardholders in the country.

The numbers speak for themselves. Credit card outstanding is up 70 per cent in the last one year. Even the non performing assets are hovering at 15-16 per cent from this category.

And these numbers coupled with the rising threat of unemployment and expectation of salary cuts mean that things could be changing for the worse. Clearly, all’s not well with the lenders.

So bankers are helping customers to repay. For instance, the State Bank of India has retired 4 lakh cards in the first three quarters. And every other banker is quite willing to go all-out to settle. “If the cardholder has any payment-related problem, we sit with them and workout a solution,” said Prashant Joshi, managing director & head – private and business clients at Deutsche Bank.

Others like Citibank, Standard Chartered and ICICI Bank said depending on individual problems, these issuers are willing to either give leeway, in terms of lower interest rates or arrange a loan against assets.

In contrast, just a few months back, a leading multinational bank charged 14.5 per cent interest on the rollover amount for a single month. When the customer approached it for an explanation, he was told that the calculation is rather complex and he would be sent a calculation sheet (for a fee, of course).

But a downturn has changed a lot of things. Today the main considerations for the bank are:

Job loss: In this case, some banks are even willing to give time to customers before they began repayment. The credit card outstanding will commence once the customer gets a job. The moratorium period differs from customer-to-customer and past track record of payment.

Inability to pay: In case the cardholder's liabilities have gone up, but there is a willingness to pay, institutions said that they are ready to work out a solution. The solution often involves providing a loan against investment in assured returns products like national savings certificates, Kisan Vikas Patra, gold and others.

If investments are not sufficient to cover the entire amount, the outstanding is converted into a personal loan, which comes at a lower rate (18 - 22 per cent) than the credit card (38 - 49 per cent).

In case, the customer has heavily caught in a debt trap with multiple financial institutions, credit card companies suggest a loan against property. In this situation, the customer has to transfer the existing loan to the bank, whose credit card outstanding is high. The bank, in turn, gives the customer a top-up loan (on the existing home loan) to repay the credit card bills.

But it’s exactly not a cake walk. A case can be easily rejected, if the credit card company feels that the intent to settle isn’t genuine. “There are a lot of cardholders who default willingly, as this is an unsecured loan," said head of a credit card company.

So past records of the customer is checked. “We look at the number of calls that went unanswered, what was told to the recovery department and then come to a conclusion on a case-to-case basis,” said a credit card head.

The onus is on the customer to prove his case. Keep the following things in mind before approaching the card company.

* Salary proof – Carry the recent bank or salary statement.

* Other loans – Carry documents that provide details of all the other loans like the amounts, equated monthly instalments and tenure.

* Job loss – Carry the termination letter.

“Customer should chart out a proper plan before approaching the credit card company for any help,” said VN Kulkarni, counsellor,

Abhay Debt Counselling Centre.