Credit card users need protection

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.