KUALA LUMPUR: Bank Negara Malaysia has tightened the rules for the credit card industry to inculcate sound financial and debt management among credit card users while issuers were barred from increasing cardholders’ credit limit without obtaining their consent.
“These measures are also aimed to promote fair and responsible business practices by credit card issuers with further enhancements in the cards security infrastructure,” it said on Friday, March 18.
With immediate effect, BNM raised the minimum income requirement of new card holders to RM24,000 per annum from RM18,000 a year.
The central bank also limited the maximum credit limit for card holders earning RM36,000 a year or less to two times their monthly income of card holder per issuer.
BNM's deputy governor Nor Shamsiah Mohd Yunus said at a press conference on Friday that “these new guidelines are to promote public confidence in the usage of credit card as a viable and safe payment.”
“In addition, it will ensure fair business practices as well as greater transparency and disclosure," she said.
Nor Shamsiah said credit card debt in Malaysia currently remained at a manageable level. As at end 2010, outstanding credit card debt totalled RM30.8 billion or 5% of total household debt.
"Although credit card usage continued to increase, non-performing loan ratio remains low. As at end 2010, credit card non-performing loans were only 1.7% of total credit card loans and 2% of the total banking system’s non-performing loans," she said.
In a statement issued by BNM, it said on the new ruling for cardholders earning RM36,000 per annum and less, the cardholders could only hold credit cards from a maximum of two issuers.
BNM said existing cardholders with credit cards from more than two issuers had until the end of 2011 to select their preferred issuers.
Cardholders would also be given at least two years to service their outstanding credit card debt for the credit cards that have been cancelled for the purpose of meeting this requirement.
For existing cardholders, whose credit card outstanding balance exceeds the maximum credit limit, a grace period of two years will be given to them to meet with the new requirement.
BNM said the card issuers would engage with the affected cardholders to assist them in restructuring their repayments to facilitate the smooth implementation of this measure. Cardholders can also seek the assistance of Agensi Kaunseling dan Pengurusan Kredit (AKPK) for advice on their debt management.
The central bank said to ensure responsible business practices in provision of credit cards, the issuers must adopt fair, transparent and responsible approach in marketing and offering of credit cards to consumers.
“Issuers are not allowed to increase cardholders’ credit limit without obtaining their consent. Issuers are also not allowed to offer a credit advance in the form of cheque payable to the cardholders unless the cardholders have requested for the credit advance,” it said.
BNM said to enable consumers to make comparison and informed decisions; card issuers must provide a product disclosure sheet that contains key information on the card’s features, fees and obligations of the cardholders.
It said issuers had to display prominently alerts to communicate to cardholders the implications of meeting only minimum and partial repayments.
At the end of each year, customised information on how long it will take to fully pay off the cardholder’s outstanding balance and the total interest costs if the cardholder only makes minimum repayment will be issued to each cardholder. This will be effective for annual statements issued from December 2011.
BNM said to further enhance credit card security and to promote public confidence in the usage of credit cards as a safe payment instrument, from Jan 1, 2012, transaction alerts via short messaging service (SMS) will be implemented by card issuers for their cardholders after transactions are performed.
“This will be followed by the implementation of the personal identification number (PIN) verification for all card transactions from Jan 1, 2015 onwards,” it said.
