China tightens credit card regulations

The China Banking and Insurance Regulatory Commission and the People's Bank of China issued new rules for the credit card sector, citing the need to improve methods in developing the credit card business, boost compliance and enhance the quality and efficiency of financial services.

The move came after Chinese regulators found weak service standards, inadequate risk management and control, and violations to customer rights and interests, according to a July 7 release.

The new rules require clearing institutions and card acquirers to better identify and transmit transaction information and to take steps in preventing abnormal card use such as theft and illegal fund transactions.

Meanwhile, financial institutions are required to provide information inquiry channels, notify clients regarding repayment and overdue payments, and make available information on outsourced collection agencies.

The regulators mandated the monitoring and management of dormant credit cards, including restricting the number of cards with no active transactions for more than 18 consecutive months and zero overdraft or overpayment balance to 20% of all cards issued.

Further, the new rules ban marketing activities such as tacit consent and mandatory bundled sales, and required banks to include customer details in all credit lines for unified management. In credit card contracts, banks should clearly state the maximum interest rates and explain terms such as compound interest and other fees.

Businesses will generally be given two years to comply with the new rules, the regulators said.