The Hong Kong Association of Banks (HKAB) issued new guidelines for its member lenders Friday with the aim of improving practices in their credit card business.

The move is set to align local lenders to international standards recently set in other developed markets.

The organization singled out 11 "good practices" for the credit card business and advised member banks to fully adopt them by the end of March 2011.

"After reviewing credit card reforms in the US and the UK, we think some of the guidelines are applicable in the local market," said Lo Chung-hing, acting chairman of the HKAB after its regular meeting on Friday. "By doing so, consumer protection and transparency can be further enhanced. It is very important for Hong Kong to maintain its status as an international financial center."

Primary concerns among the 11 recommended practices are related to interest rates and fee charges.

On the interest rate side, the HKAB suggested that member banks should not raise interest rate on those who are engaged in talks to restructure their debts due to financial difficulties. If a rate hike is necessary, the notice period must not be less than 60 days and reasons for making the decision must be stated clearly in the notice document.

For fee charges, the HKAB suggested that unless the credit card holders use services at bank counters, they should not be charged for paying back their debts via other means, such as by phone or online. Meanwhile, they should not be charged for not using their cards and canceling their cards, unless they fail to fulfill duties stated in the promotional offers they have received.

Other recommended practices include not raising the credit ceiling of those who are negotiating the restructuring of their debts or are under financial stress. They also stated that there should be a 60-day notice period before revising important clauses, and that bills should be mailed 21 days before the balance is due.

The HKAB's Lo said the industry group will hold further discussions with the Hong Kong Monetary Authority (HKMA) on how the city's lenders can adopt more good practices that are being used in other developed markets.

US President Barack Obama signed the Credit Card Reform Act into law in May 2009, following its passage in the Senate and Congress. The act took effect in February 2010, which set clear guidelines for lenders to follow.

Most of the 11 "good practices" proposed by the HKAB can find their models in the more comprehensive Act adopted in the US, such as limits on credit card companies' ability to change interest rates and charge fees.

According to figures from the HKMA's credit card lending survey for the third quarter of 2010, the total number of credit card accounts in the city increased by 2.9 percent to 13.4 million and total card receivables grew by 5 percent to HK$78.2 billion in the third quarter.

China Daily

(HK Edition 01/22/2011 page2)