CBRC unveils rules to regulate credit card sales

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The banking regulator issued new rules on the supervision and management of credit cards, aimed at preventing misleading promotions among card issuers and protecting against default risks of card holders.

The China Banking Regulatory Commission (CBRC) posted Wednesday on its official website the draft measures open to public feedback until September 10.

The new measures are the first of their kind for China, and they address market access, card issuance management and risk management, adding far more detail to the current rules issued by the central bank in 1999.

The CBRC forbids the commercial banks to tie card salespeople's compensation solely to the number of cards issued.

According to the new rules, card salespeople must fully disclose to customers the fees charged, interest rates and risks. They are not allowed to disclose customer's information for sales of the bank's other products or services without the consent of the card holders.

The card issuer is forbidden to charge card holder annual fees if the card is not activated. The commercial banks are not allowed to issue cards to adolescents aged under 18, except supplementary cards attached to their parents' accounts.

"The new measures are aimed to prevent against rising default risks of credit card, and also to improve the service quality," said Tan Ruyong, finance professor at Shanghai University of Finance and Economics.

The credit card business has developed fast in recent years. The total number of cards issued by commercial banks has reached 185 million.

The transaction value by credit card was 2.2 trillion yuan ($324.96 billion) in the first half of the year, 730 billion yuan ($107.83 billion) more than the previous year, which played an important role in driving domestic demand and promoting consumption.

But the rapid growth has brought along rising default risks.

Credit default reached 8.8 billion yuan ($1.3 billion) in the first quarter, growing by 14.4 percent year-on-year with the default ratio of 3.5 percent, up 0.4 percentage points over the fourth quarter of 2009, according to the central bank.

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