On 15 March 1963, President John F. Kennedy gave an address to the US Congress in which he talked about the issue of consumer rights. He was the first world leader to do so, and the consumer movement now marks 15 March every year as World Consumer Rights Day. This year, Consumers International (CI), a leading global body for consumers, sent a report to G-20 leaders demanding fair financial practices. Apparently, CI found evidence that whether in rich or poor countries, poor financial services was one of the top consumer complaints. Among its top recommendations to ensure consumer protection was “Better information design and disclosure.” It was elaborated as “financial service providers should be required to take more responsibility for ensuring that consumers receive clear, sufficient, reliable, comparable and timely information about financial service products.”
Also read | Vandana Vasudevan’s earlier columns
There is an area in retail banking where this requirement is not exactly shining through. This is when banks bundle up products—throw in a credit card with a savings account, add insurance to a personal loan and so on. This is naturally not done out of generosity of spirit but as a strategy to increase their footprint in the customer’s life. It’s an attempt at 360-degree coverage of the customer— the assumption being that a savings account holder will need a credit card and by offering it to him as a package while he is opening the account, the bank prevents the account holder from going to a competitor for a credit card later. It’s a sound business strategy, mutually beneficial to both buyer and seller like all trade must be in order to be sustainable—except when the buyer does not even know he signed up for this extra product.
Like I did not know that the innocuous act of opening a bland savings account last month, in the neighbourhood branch of a respected private bank, will result in the receipt of a gold credit card. The trouble with receiving these unexpected cards is that they each come with their own karmic cycle, as it were. It’s a card whose owner never really wanted it, so it will lie there unused. Then suddenly in a rare situation where no other card is available, this one will be pulled out. Since it is not an active card, I would have skipped setting up a stable payment mechanism for it. Hence, that lone debit will haunt me and cause interest build up and late charges and much angst. The reason I ended up with this unloved bit of plastic is that I never filled the savings account form myself. The branch official just took my signatures in a couple of places and said he’d do the rest, so I had no knowledge that this “free credit card” was part of the deal.
The standard practice during the opening of a loan or deposit or requisition for a credit card is that the customer signs the form and the rest of the details are filled in by the visiting salesman. Often this salesman, is a direct sales agent (DSA), a young man who has not yet finished his higher education, earns about Rs5,000 as salary and is in a rush to get to the next sale to increase his chances for incentives. The customer is also in a rush, eager to avoid drudgery like filling up forms and happy to move such monotonous tasks to the bank ‘s representative. A lot happens in that brief, hurried, closed door interaction between these two parties. Unsaid words hang thickly in the air. Implicit trust meets deliberate half truths. Hidden agenda spots negligence and inches its way in. And finally, a betrayal, a heartbreaking discovery and a bloodthirsty complainant.
Let’s see how this unfolds, (admittedly with far less drama). The customer who merely signs the form and leaves the rest to the representative, will not notice, for instance, that a credit card offer is bundled with an insurance product. If that is explicitly explained, including the fact that the premium will be automatically deducted from the first month, some customers may not agree to signing up. The salesman knows this and therefore stays quiet, smilingly pointing to the places where the customer has to sign and leaving the premises with a closed sale. In a few cases, he might even try to explain the features, but the customer might be too indifferent or busy to listen. A month later when there is an incomprehensible debit in the statement, the customer learns of what transpired and stomps about in rage and fury. Relax, says the resigned, weary voice of the bank. You signed the form.
A banker who does not wish to be identified but has 25 rich years of experience in retail banking, says, “It’s a two-way responsibility. The customer also has a responsibility to understand what he is getting into. No customer ever wants to fill in the form, the problem starts from there.”
Sometimes the pitfalls of this are found after the customer has passed away. I am aware of a case of a savings account opened in an aggressive private Indian bank, where it was discovered, after the customer’s death, that the nominee column had not been filled by the sales person. It now needs an indemnity signed in favour of one member by siblings spread across the globe. In my own experience, the nominee requirement in a form is often brushed aside by the salesperson as something that can be done off line, later, by filling another form. A tsunami destroyed hundreds of lives in hours, so it may be prudent to insist on writing out the nomination there and then.
Therefore, “ensuring clear, sufficient and reliable information” to financial customers, as recommended by international consumer groups last week on World Consumer Rights Day, is the bank’s responsibility. But it is also in the customer’s interest to ensure that the large print is finely understood and the fine print is largely clear, while filling up applications. Because finally, it’s our money and we get hurt more easily.
Vandana Vasudevan writes stories of mass urban consumer experiences. She is a graduate from the Indian Institute of Management, Ahmedabad, and currently works with HT Media Ltd. Comment at email@example.com