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Credit Card Issuing Institutions Handling Installment Payment Business and Finance Companies May Not Become Designated Merchants
(23 November 2004)
Order Ref. Jin-Kuan-Yin-(IV)-0938011919
Subject:
This is in response to your status report on the handling of credit card installment payment transactions by credit card business institutions, comments on risk control/management mechanisms and consumer dispute resolution principles, and comments on whether it is appropriate for finance companies to be designated merchants contracted by credit card acquiring institutions. Please be advised and forward the information herein.
Statement:
1. This is in response to letters dated 21 June 2004 (ref. Cyuan-Sin-1452) and 20 July 2004 (ref. Cyuan-Sin-1581) from the Bankers Association of the Republic of China.
2. Credit card business institutions shall comply with the following provisions in the handling of risk control/management mechanisms in credit card installment payment transactions:
(1) Where card issuing institutions provide credit card installment payment transactions to card holders, the credit limit thereof shall be included within the credit limit of the card holder's original credit card for control/management, no separate credit limit approval may be given; card issuing institutions not in compliance with these provisions shall make full adjustments by the end of 2004.
(2) The number of installment periods in credit card installment payment transactions shall be limited to not more than 36 installment periods (3 years).
3. Card issuing institutions handling credit card installment payment transactions shall make clear written disclosures to consumers containing at least the following content:
(1) In this credit card installment payment transaction, the card issuing institution will make one lump-sum advance payment of the consumer transaction funds to the designated merchant, and the card holder will pay the transaction debt in installments to the card issuing institution.
(2) The card issuing institution is not involved in the substantive purchase relationship, e.g. in connection with the delivery of the merchandise or any defect in the merchandise. For any refund matter related to the return of merchandise or cancellation of services, the card holder shall first contact the designated merchant to seek resolution of the matter; if it cannot be resolved, it may ask the card issuing institution to handle the transaction in question under the Procedures for Handling Questionable Accounts.
(3) A card holder engaging in a mail order purchase or door-to-door-sales purchase transaction may rescind the purchase contract with the designated merchant under Article 19 of the Consumer Protection Act.
4. In a credit card installment payment transaction, the credit card issuing institution makes one lump-sum advance payment of the funds to the designated merchant. By nature, it is an act of extending credit, so it must be handled prudently. For transactions that readily lead to consumer disputes, such as deferred provision of goods or services, the card issuing institution shall ascertain the legal nature of and liability associated therewith, and prudently evaluate the risk of undertaking it, including the stipulations for provision of the goods or services and any related risk that the card issuing institution shall bear upon inability by the designated merchant to provide the goods or services as scheduled. Please formulate, by 15 December 2004, rules and risk control/management mechanisms applicable to the creating of contracts with designated merchants by credit card business institutions (including card-issuing and acquiring institutions) (e.g., required qualifications of designated merchants, security deposits required to be collected, time limits for provision of deferred goods or services, setting limits on amounts of advance disbursements…etc.) and report them to the Financial Supervisory Commission by letter, and incorporate them into rules of the self-regulatory code for credit card business. Before these rules have been ratified, a credit card business institution may not undertake this type of business.
5. A finance company may not be a designated merchant contracted by a credit card acquiring institution. If a finance company wishes to take part in the credit card transaction process, it shall do so by separately entering into contracts with the individual parties to the credit card transaction process in a third-party capacity. The rights and obligations of the parties shall be expressly stipulated by contract.
6. Please notify all credit card business institutions to comply with the matters in the above "Statement." |