The Consumer Council has called on credit card issuers to employ the "opt-in" sales practices when marketing credit card upgrades.
The Council received a total of 27 complaints in 2010 and 2011 relating to upgrade of credit card, of which most consumers were unhappy about the opt-out notices required by credit card issuers: the recipients would automatically be enrolled for the new upgraded card unless notification had been sent to the company that they did not want it.
With the unilateral upgrading tactic, the consumers were forced to accept the offer if they failed to respond.
In one of the complaint cases, a consumer was given a period of 60 days to notify the bank should he decline the offer of an automatic credit card upgrade. Yet, he was unable to get through the bank's service hotline, fearing that he would be levied a hefty HK$1500 for the new card's annual fee when the period expired, he took his case to the Consumer Council.
In another case, a consumer lost all of her 66,439 bonus points - which should have been effective till 2013 - because she failed to activate the new card the bank had sent her. The complainant said that she did not receive any mail informing her that all bonus points of the current card would be transferred to the upgraded platinum card. She put forward her case to the Council demanding the reactivation of her current card.
In light of these complaint cases about unsolicited credit card upgrades, the Council surveyed 20 credit card-issuing institutions with a view to studying their arrangements in relation to credit card upgrade.
Of the 15 credit card issuers responded, 14 card issuers replied that they would obtain verbal or written consent of the consumer before the credit card upgrade. For the remaining card issuer, consumer who refused to take the offer would have to respond within 14 working days after the notice was posted, or else the consumer will be offered an automatic upgrade.
The survey also revealed that consumers may not be able to retain their current card after the upgrade, which could pose inconvenience to consumers.
The study found that only 4 of the 15 card issuers allowed consumers to retain the current credit card and the new card while 5 card issuers would deactivate the current cards once the new cards were confirmed. Another 5 card issuers would deactivate the current cards after the specific deadline.
In addition, 14 surveyed card issuers replied that most auto-pay arrangements like public utility bills and insurance premium payment in the current card are not transferable to the new plastic, consumers using the auto-pay services will have to make new arrangements with merchants when switching to the new card.
At the same time, the study also alerted consumers to pay close attention to the options available for automatic bill payment for credit card.
The study revealed that the direct debit authorization form provided by some banks only offered two modes of payment - either full payment or minimum payment - and no in-betweens. Consumers who chose to make only minimum payment would have to face hefty finance charges on the outstanding balance - with interest calculated on a daily basis and with no interest free repayment period for new purchases.
New measures had been introduced by the Hong Kong Association of Banks and Hong Kong Monetary Authority to improve existing arrangements for consumers who wish to use automatic bill payment for credit card. Consumers are now entitled to elect the preferred ratio for automatic bill payment for credit card apart from full payment and minimum payment.
In conclusion, the Council calls on the credit card issuers to provide consumers the "opt-in" option in the process of marketing new plans to the consumers, and allow consumers ample time to make informed and well-considered choices.
When contemplating a credit card upgrade, consumers are advised to read the terms and conditions carefully and take note of the arrangements of the switchover.
They should also take into consideration their own needs, as well as the higher annual fees that may come with the upgraded credit card.
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- 2012.04.16