List of total 31 enhanced credit card practices

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1 List of total 31 enhanced credit card practices Phase Measures to be (or have been) implemented Implementation First phase Within March Card issuers should not increase the APR or impose of measures additional charges on a credit card if the customer is at risk of financial difficulties and has agreed with or is in discussion with the card issuer for a debt relief plan for on 21 the account. January 2011) 2. On an APR increase or a significant change in account terms, customers should have at least 60 days to tell the card issuer they want to reject the change by closing the credit card account. 3. If a card issuer increases an APR that applies to a credit card account, at least one principal reason in general terms should be given in the notification letter for the rate increase. 4. Card issuers should allow customers to make a payment by any methods without incurring any fee, unless such payment is made through a bank counter. 5. A card issuer should not impose an account inactivity fee on a customer. 6. A card issuer should not impose a closed account fee on a customer, provided that a card issuer may recover the cost of a welcome gift or other benefit already received by the customer if the conditions for receiving the gift or benefit as stated in the terms agreed with the customer have not been fulfilled by the customer. 7. Credit card limit increases should not be offered in respect of accounts that are in default for more than 60 days or are subject to a debt relief plan. 8. Card issuers should provide customers with 60-day advance notice before any significant changes in account 1

2 terms. 9. Card issuers should mail or deliver periodic statements to customers 21 days prior to the payment due date. 10. No credit card should be issued to customers under 18 with no income or guarantor. Second phase of measures on 10 June 2011) 11. A card issuer should evaluate a customer s ability to repay before opening a credit card account or increasing any credit limit to an account. 1. A communication offering an increase in a credit limit should be sent to customers at least 30 days or a calendar month before the change, and should explain what they can do if they wish to reject the new limit. 2. Card issuers should post their credit card agreements and terms and conditions online at their own websites. 3. If the payment due date in a given month falls on a day on which the card issuer does not receive or accept payments, the card issuer should treat a payment received the next business day as timely. 4. The credit limit granted to students in an institution of higher education must not exceed HKD10,000 (applicable to new cards only), unless the student has submitted a written application and has given financial information indicating that the student has an independent ability to repay the proposed extension of credit in connection with the account. 5. On an APR increase due to delinquency or default, the card issuer should give an advance notice to customers, after the event triggering the rate increase, during which the customers can tell the card issuer they want to reject the change by closing the credit card account. 6. No double-cycle billing on customers who have made full 2 Within Q Within 2012

3 payment in previous card statement but made partial payment in current statement only. For example, when a customer does not make full repayment by payment due date and his account is subject to interest, the interest should accrue from the statement date of the current card statement, but not from the date of the transaction posted in the previous card statement. 7. A standardized definition of minimum periodic payment, i.e. all interest and fees and charges (including annual membership fees), plus at least 1% of outstanding principal. 8. Allocation of the portion in excess of the minimum payment should be based on a principle that minimizes interest charges to the customer. For example, the card issuer should first allocate the excess amount to the monthly instalment balance, then to the balance with the highest APR and any remaining portion to the other balances in descending order based on the applicable APR. 9. Customers should be allowed to set up an automated payment instruction to pay the card issuer any percentage of the statement balance between minimum payment and full payment on a regular basis. 10. Monthly statement should show details of fees and charges, interest and APR by retail purchase and cash advances etc. 11. Card issuers should disclose generic information on periodic statements about the amount of time and total cost involved in paying a balance in full by making only minimum payments. In addition, the monthly payment amount required and total cost to pay off the outstanding balance in 3 years should be provided. 3

4 Third phase Within Card issuers should disclose credit card contract terms and of measures conditions in simple legal language that customers can readily understand. on 2 March 2012) 2. Card issuers should disclose terms and conditions in a reasonable layout and font size that is readily readable. 3. When customers apply for credit cards, card issuers should provide them with a Key Facts Statement containing essential information, such as interest rates, fees and charges. A full set of terms and conditions should be given to customers on or before notification of the approval of credit card application. 4. When increasing an APR, card issuers should notify the customers at least 60 days before the change, and provide them with an option to transfer the outstanding balance to an instalment loan at an APR not higher than the existing credit card APR. Within For any APR increase, card issuers should review the account at least every 6 months. When a reduction is indicated by the review, the card issuer must reduce the APR previously increased not later than 60 days after completion of the review. 6. Card issuers should provide a convenient channel for customers to opt out of over-the-limit facilities provided by card issuers (i.e. extra facilities provided to a customer whose outstanding balance has already reached the credit limit) on credit card application forms and monthly statements. Customers can exercise their opt-out right any time, and if customers exercise their opt-out right, the card issuer should effect the customers' request as soon as practicable. For customers who have not opted out of the over-the-limit facilities, a card issuer should not impose more than one over-the-limit fee per billing cycle. 4

5 7. If a card issuer imposes a fee for violating the terms or other requirements of an account, the fee should be set at a reasonable amount. Late payment fee should not be higher than the amount of minimum payment. When charging fees on minor breaches involving small amounts, under normal circumstances, card issuers should exercise flexibility in waiving or reducing the fees. 8. In case a late payment is triggered by a returned payment, card issuers may impose either a late payment fee or a returned payment fee, but not both. 9. Card issuers should provide on monthly statements or by means of a calculator on their websites customised information about the period of time and total cost involved in paying a balance in full by making only minimum payments. In addition, the monthly payment amount required and the total cost involved to pay off the outstanding balance in 3 years should be provided. 5