New guidelines to enhance transparency of credit card instalment payment plans have come into effect before October 1.
In the first nine months of this year, the Council received 213 consumer complaints on credit card instalment payment plans. In 66 of them, complainants were required to continue making repayments even after the closure of the shops involved, pursuant to the credit card instalment plan agreement which they had entered into.
The Consumer Council published in the July issue of CHOICE a consumer alert on credit card instalment payment plans. The Council noted that the Hong Kong Monetary Authority (HKMA) issued a circular in August reminding authorised institutions of the importance of making the terms and conditions of instalment payment plans as transparent and comprehensible as possible for customers, and requiring authorised institutions offering instalment payment plans to implement new measures as soon as practicable.
According to the HKMA's circular, for credit card instalment payment plans not subject to chargeback protection, authorized institutions including banks should ensure that consumers have all necessary information (contained either in A4 format or in a leaflet), set out in an easily readable font, when entering into a credit card instalment payment plan. The following salient points should be clearly listed:
- The credit card payment-by-instalment plan is a loan agreement;
- The customer agrees to pay for goods or services that may be delivered at a later time;
- The instalment amount will be counted against the customer's credit limit;
- The customer's repayment obligations, in particular, whether the customer can stop repayments if the goods or services concerned are not delivered by the merchant as contracted;
- The customer will not enjoy chargeback protection.
For consumers who opt to sign up, they are required to sign separately against each salient clause to confirm that they have read and understood the terms. Authorised institutions should not process applications without all the required signatures present.
Authorised institutions are required to set up contact arrangements such as card centre hotlines to answer enquiries from customers and explain the terms and conditions of instalment payment plans, and other payment options. If consumers are unsure about the terms and conditions, they can look up the contact information set out in the application form and contact the authorised institutions for clarification at the point of sales.
The Council welcomes HKMA's initiative to enhance transparency, but would remind consumers to take note of the following when considering whether to enter into any credit card instalment payment plan:
- Has the merchant supplied you with the terms and conditions of the instalment payment plan?
- Has the merchant reminded you that you can contact the authorised institution concerned for clarification of your queries?
- Before you sign separately against each salient clause, do you really understand the content or would you need to enquire the authorised institution first?
- Have you made the necessary enquiry into details of the instalment payment plan agreement?
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