False promises to customers: Citibank, HSBC under scanner

The investigative arm of the country's anti-monopoly watchdog has recommended action against two multinational banks for making false promises to their credit card customers and violating the RBI guidelines.

In its preliminary report submitted to the Monopolies and Restrictive Trade Practices Commission (MRTPC), the Director General of Investigation and Registration (DGIR) said Citibank and HSBC have violated the rules framed by the Reserve Bank of India and caused loss to the general public.

According to the DGIR, both banks were allegedly delaying delivery of bills and realisation of cheques towards payment just to charge increased interest rate, late fee and fine etc.

Moreover, the DGIR also said the two banks were doing their credit card business in the country through direct sales agents, who were working either as independent contractors or on commission basis.

These DSAs were soliciting the general public by giving an impression that they were the direct agents of the bank "" without disclosing their independent status. "It gives an impression to a common man that whatsoever promises they are making are as good as made by an officer of the bank," the DGIR said.

The report also said that the DSAs of these banks even used government/semi-government offices and premises for soliciting business and sales promotion.

As per the terms and condition of the licences granted by the RBI, these banks are supposed to carry out their banking activities only from their own branches and offices, the report said.

The guidelines also required Citibank and HSBC to provide a 24-hour toll-free number for customer care service. However, sources said the investigation found that the numbers were not toll-free.

The authority also found that the Most Important Terms and Condition (MITC) document supplied by the banks with the credit card was in English and not in the language known to common people.

The language used by the banks in MITC did not convey in full the interest-free grace period in respect of credit cards, the DGIR has said.

Moreover, Citibank did not mention the address of either its registered office or corporate address, making it difficult for a consumer to issue notice of termination for credit card services.

As per the RBI guidelines, MITC should have a couple of examples of calculation of interest rates applicable to the card holder, which was not found.

DGIR observed that HSBC's MITC was in smallest font size, which hardly any one can read with bare eyes. Moreover, the MITC was not part of the packet in which credit card was delivered.

In addition, the banks were even not maintaining a do-not-call-registry (DNCR), which a person can use if he does not wish to receive unsolicited calls or SMSs.

The DGIR also found that in the call centres of the banks, phones were operated mechanically and no expert person was available to respond to the customers' grievance.

The Directorate General noted that it was a deceptive method and amounted to unfair trade practice as banks are required to explain to their customers about the billing process.