Get credit for being informed - 2

Credit is a product you buy just like any other product.
The Sunday Times asked the Malta Financial Services Authority to explain the use of credit cards, giving some useful hints from a consumer protection point of view.

In many cases, credit cards are kept in a wallet or purse, together with cash and sometimes other personal documentation, such as the identity card or driving licence. It is not uncommon for people to misplace their wallet, or for the wallet to get stolen, even after taking all necessary precautions.

As a cardholder you are bound to exercise all possible care and diligence to ensure its safety. So never leave a credit card in the glove compartment of a car (or, worse still, on the dashboard or passenger seat). Neither should you leave a card (and wallet) unattended.

And if you are travelling, it would be prudent not to put the wallet in the back pocket of your trousers (for men) or in an unzipped handbag (for ladies). It is safer to keep cards and valuables in the hotel's safe deposit box.

As soon as you realise a card is missing, you must report the loss or theft to the bank immediately. So make sure you keep the bank's contact number easily accessible, especially when you are abroad. If the card is lost in the evening, don't wait until the next morning to report it - it may be too late.

As soon as the card is reported, the bank will assume responsibility for any further use of the card. If it is found that, up to the time of notification, someone has made use the credit card in a fraudulent manner, the cardholder is liable only for the first Lm60 (or its equivalent) of the amount. Once the bank is notified, the cardholder would not be liable for any further loss.

However, if the cardholder is found to have acted with extreme negligence or fraudulently, the Lm60 limit will not apply and the holder would have to pay for the whole amount. Being "extremely negligent" may mean different things to different people (the Central Bank of Malta directive does not define the term).

However, here are some examples of what can be considered instances of negligence for credit cards:

¤ if the cardholder waited until the next morning to report the stolen or missing card;

¤ if you leave the PIN with the card; or

¤ not signing the card on the back.

Some suggestions

To avoid any undue inconvenience it is suggested that the cardholder takes a copy of all cards (front and back) and keeps the copy in a safe place at home. In some of the cases the MFSA Consumer Complaints Office was asked to investigate, it was evident that the signature on the receipts differed from that of the actual cardholder.

As the bank was not in possession of the stolen card, it was hard to prove that the fraudster did not sign the back of the card prior to his shopping spree.

While it is true that shop assistants have a duty to verify that the signature on the back is the same as that on a receipt, very often this is not done and it may, therefore, be prudent to protect your interests.

Even if the card is stolen and the signature on the receipt is different, a copy of the card can be quite handy to prove: a) the card was signed; and b) the shop attendant has not compared the signatures.

Issuer's obligations

The issuer also has a number of obligations. They include:

1) not disclosing the holder's PIN, except to the holder or to any person authorised by the holder;

2) not mailing an unsolicited credit card, except where it is a replacement or renewal for one already held by the holder;

3) keeping, for a sufficient period of time, internal records to enable the tracing of transactions referred to and the rectification of errors;

4) ensuring that appropriate means are available to enable the holder to notify the issuer in the case of theft or loss, etc. Where notification is made by telephone, the issuer provides the holder with the means of proof that he has made such a notification; and

5) in the case of a dispute with the holder on a dubious transaction, and without any prejudice to any proof to the contrary which the holder may produce, the issuer must prove that the transaction was accurately recorded and entered into accounts and that it was not affected by technical breakdown or other deficiency.

Issuer's liabilities

The issuer is liable for non-execution or defective execution of the holder's transactions, even if the transaction was initiated at devices, terminals or through equipment, which are not under the issuer's direct or exclusive control, provided that the transaction is not initiated at devices, terminals or through equipment unauthorised for use by the issuer.

The liability of the issuer also extends to transactions not authorised by the holder, as well as for any error or irregularity attributable to the issuer in maintaining the holder's account.

In both cases the amount of liability shall consist of the amount of the unexecuted or defectively executed transaction plus interest, if any, and the sum required to restore the holder to the position he was in before the unauthorised transaction took place.

Any further financial consequences, particularly those concerning the extent of the damage for which compensation is to be paid shall be borne by the issuer in accordance with the law applicable to the contract concluded between the issuer and the holder.

The issuer is also liable to the holder of a card for the lost amount of the value stored on the instrument and for the defective execution of the holder's transactions, where the loss or defective execution is attributable to a malfunction of the instrument, of the device, terminal or any other equipment authorised for use, provided that the malfunction was not caused by the holder knowingly.

Using credit cards abroad

When using your credit card overseas, any amounts charged to the account will be converted to Maltese lira at a rate of exchange determined by the issuer for the date when such amounts are charged to the account. Banks are obliged to disclose the exchange rate used on the statement issued to the cardholder.

If the cardholder would like to check the rate used, he/she may refer to the terms and conditions which should explain how this is arrived at.

When withdrawing money from a cash machine which is not the property of the issuing bank - irrespective of whether you are in Malta or abroad - the bank which owns the machine will levy a charge for the transaction. The issuing bank should be able to give a detailed list of charges which are applied for such transactions.

Settling your credit card bills

The issuer is bound to send periodic statements of the credit card account. The cardholder is bound to pay the issuer within a period stipulated in the agreement (normally 25 days starting from the date of the statement). The issuer would also specify the minimum repayment due in the statement.

Usually the minimum repayment consists of the greater amount between Lm5 or 5 per cent of the outstanding balance shown on the statement. If the cardholder fails to pay the minimum amount on the statement, the bank will charge a penalty fee.

In addition to the minimum repayment, the cardholder is bound to pay any amounts in excess of the credit limit, any arrears due for previous statements as well as amounts relating to a card transaction in breach of the agreement between the issuer and the cardholder (such as a penalty fee on late payment).

Interest on advances

If the full amount due in the statement is paid within the period of time specified by the issuer, no interest is charged. The daily balance of any outstanding amount at the end of the 25-day period is charged interest at the rate applicable as at that time.

The bank is obliged to disclose the amount of interest charged on the credit card account on the holder's statement or on request.

In the case of cash advances, interest is charged on a daily basis on the balance of the advance outstanding as from the date each advance is withdrawn until the full amount is repaid to the account.

On the coming into force of the Consumer Credit Regulations (Legal Notice 84 of 2005), consumers will have to be on the watch-out for the Annual Percentage Rate of Charge or APR.

The APR is the total cost of the credit to the consumer expressed as an annual percentage of the amount of the credit granted and calculated in accordance with the regulations. The APR is based on clearly defined assumptions. It is designed to measure the true cost of the loan and creates a level playing field for banks.

In layman's terms, the APR is an easy way to compare similar credit products. The lower the APR is, the less the consumer pays in charges, fees, commission and interest. The APR will not include penalty fees and other fees which may be charged to the cardholder for non-compliance of any obligations arising from the contract with the issuer.

Tips to remember

¤ Sign the card as soon as you receive it.

¤ Never write or record the PIN number.

¤ Memorise the PIN Number and dispose of any notification with the details.

¤ On receipt, you should immediately sign the card and write down the ID Card Number next to your signature.

¤ Keep the card in a secure place and do not leave it out of sight when using it in shops. Never leave it lying around.

¤ Keep a list or photocopy of all cards (front and back), account numbers, expiry dates and telephone numbers of the customer service department in a secure place (not in your wallet or purse) so you can quickly contact your bank in case your cards have been lost or stolen.

¤ Never lend your cards to others.

¤ When using your card at an ATM, always take ATM receipts with you; never dispose of them in the bin adjacent to the ATM.

¤ Ask the bank to provide you with a full list of tariffs which it levies on credit cards. Being "unaware of charges" is no excuse.

¤ Never give the credit card account number over the phone unless the cardholder has initiated the call and the company is a reputable one.

¤ Never ever respond to e-mails requesting your credit card number.

¤ When providing your card details over the Internet make sure that the site is a secure site (the URL should start with https:// and a lock will appear on the bottom of the browser) and that the Website owner has a certificate of security which you can click on and see.

¤ Settle any credit card bills monthly and, if possible, avoid accruing bills because interest is charged on any outstanding amounts. If this is not possible, you should ensure that the minimum monthly repayment displayed on the statement is paid on time. If you do not pay the minimum monthly repayment, you will incur a late payment fee and could lead the bank to block further usage of the card.

Concluded