The Hong Kong Monetary Authority (HKMA) today (4 October)
released a set of proposals aimed at improving the business
practices of authorised institutions (AIs) in relation to the
provision of credit card services for consultation with the banking
industry and the Consumer Council (see enclosed paper for details of the
proposals). The proposals have been formulated by an Informal
Working Group (IWG) on review of the Code of Banking Practice
convened by the HKMA and comprising representatives of the Hong
Kong Association of Banks and Deposit Taking Companies Association.
In view of the increasing public concern about the practices of AIs
in relation to the provision of credit card services, the IWG has
accelerated consideration of these issues.
"It has become very clear that there is scope for improving the
credit card practices of authorised institutions. This package of
measures has been devised with a view to making credit card terms
and conditions more consumer-friendly, and ensuring that they are
consistent with applicable laws," said Mr Simon Topping, Executive
Director (Banking Policy) of the HKMA.
In working out the relevant proposals, the IWG considers that
the overriding principle is that the terms and conditions for
credit card services should be "fair" and "transparent" to
consumers. In particular, it is recommended that any cost indemnity
provision in relation to recovery of debts contained in the terms
and conditions should only provide for the recovery of costs and
expenses which are of reasonable amount and which were reasonably
incurred.
The IWG also proposes a series of measures to promote greater
transparency of credit card services, including a requirement for
AIs to highlight all major terms and conditions which impose
significant liabilities or obligations on customers in the
application forms for credit card services, and to follow a
standardised method in calculating and quoting the annualised
percentage rates (APRs) of interest for credit card lending. The
latter measure should facilitate consumers' comparison between
different charging structures which may be adopted by different
AIs.
Another recommendation of the IWG is that except under
exceptional monetary conditions, the APR of interest charged by AIs
in respect of credit card lending should not exceed the limit
stated in the Money Lenders Ordinance.
The IWG has also put forward two proposals to bring the existing
practices of AIs more into line with international practices, to
the benefit of consumers. First, it is proposed that, as long as a
cardholder has not acted fraudulently or with gross negligence, his
maximum liability for unauthorised transactions before a card loss
is reported should not be higher than HK$500 (the relevant limit in
the US and UK is US$50 and GBP50 respectively). Second, it is
proposed that supplementary cardholders should not be held liable
for the debts of principal cardholders.
"We believe this is a good set of proposals for consumers which
addresses concerns raised about authorised institutions' business
practices in the area of credit cards. Further measures in relation
to other business areas will be proposed shortly as we continue our
review of the Code, which we plan to complete by early in the new
year," Mr Topping added.
Subject to the views collected from the consultation, AIs should
implement the proposals within six months.
For further enquiries, please contact:
Thomas Chan, Senior Manager (Press), at 2878 1480 or
Jasmin Fung, Manager (Press), at 2878 8246 or
Hong Kong Monetary Authority
4 October 2000
Attachments:
Business Practices of
Authorised Institutions in Relation to Credit Cards
Annex: Calculation of
Annualized Percentage Rate in Relation to Credit Card
Products
Appendices 1 and
2
