Credit card users need protection

The Jakarta Post, Jakarta

The credit card industry has recorded strong growth over the past several years. But the industry has apparently failed to provide adequate protection for consumers. This week's Sunday Post highlights this issue.

At the end of every month, Budi, 30, who works for a finance company in the Jakarta Stock Exchange building, hurriedly tears open envelopes containing bills and peeps at the amounts owing with a racing heartbeat.

"I have four credit cards I regularly use. Some bills are no surprise since I estimate the amount owing beforehand, but I have received a shock many times at the mammoth amounts I have to pay," Budi said.

He added that he intended to cut the cards up and start paying in cash to put an end to the headache.

"My credit cards simply ruin my cash flow and financial planning," he grumbled.

Budi is not alone. Ria, 25, not her real name, is a secretary for a private company in Kuningan, South Jakarta, and has had the frightening, not to mention embarrassing, experience of hostile men arriving at her office demanding she pay her debts.

"Fortunately, a friend of mine came to help me. The men left after we gave them 'transportation money' of Rp 100,000. At least I have a month to settle my debt before they come again should I fail to settle the bill," she said.

Complaints have soared in the credit card business over the past three years in tandem with the aggressive marketing efforts by banks to lure new customers.

Non-governmental organization Indonesian Consumers Foundation (YLKI) received 85 credit card-related complaints during the past three years, ranging from the use of thugs for debt collection, credit card fraud, incorrect billing, credit card renewal without the customer's consent, failure to record payments, etc. In the first month of the three-month complaint program with the central bank, YLKI received an additional 220 complaints.

"The business is getting out of hand, with aggressive marketing ploys by the issuers coupled with easier application procedures, which sometimes ignore prudent banking practices," said YLKI chairperson Indah Suksmaningsih.

Late last year, or 10 years after the credit card business first entered the market and started booking 10 million to 12 million transactions worth Rp 30 trillion a year, the central bank issued a regulation to monitor the use and issuance of credit cards.

"Credit card issuers are obliged to exercise risk management to minimize risks in credit card issuance," said a senior official with the central bank, Dyah NK Makhijani, recently.

Dyah said the central bank also required issuers to have an internal system to detect and anticipate possible misuse of personal data of customers amid the rampant practice of credit card fraud involving the staff of issuing companies.

Unfortunately, the central bank regulation does not offer customer protection, which has become a major source of complaints, like the use of violence in debt collection.

The head of a credit card division at one local bank who requested anonymity said the use of debt collectors was common practice in the banking industry.

"We admit that debt collectors sometimes go too far, and we have tried to tell them, but sometimes it is the debtors themselves who leave us with no other option," he said.

Meanwhile, Hongkong Shanghai Banking Corporation Limited (HSBC) Indonesia's head of marketing, Ichsan Tobing, said each bank had its own policy in the matter.

"HSBC itself is conservative in the business, relying mainly on its solid reputation and strong services to attract new customers. We strictly screen every credit card applicant for their age and annual income before approving their applications," he asserted.

"It's business we're talking about, so we have to explore every avenue to net new customers," he added.

Despite the serious consumer protection problems, the credit card industry will continue to grow strongly.

Some issuers predict that the number of credit card users will rise by 20 percent this year, thanks to easier application procedures.