Banks have an ambivalent relationship with credit card customers who are prompt payers. On the one hand they are good credit risks; on the other, banks do not make money directly out of people who pay off outstanding debt each month without incurring credit charges - except through annual card fees. We are reminded of this by our report today. This fee is no longer being waived so readily for cardholders.
In considering fee waivers, banks take into account the cardholder's banking relationship and the amount of spending and borrowing on the card. While credit card spending generally has risen, the rollover rate of balances has fallen by nearly half over recent years as people have reined in this form of borrowing or turned to cheaper personal loans. This has cut into a lucrative source of revenue.
Banks are within their rights to charge and vary the annual fee. But it is understandable if customers who are accustomed to a waiver feel hard done by and powerless. In that sense, they have something in common with people who lost money in the scandal over the marketing of Lehman Brothers minibonds. When customers are in dispute with banks, there is no independent umpire to whom they can turn.
The Hong Kong Monetary Authority, which regulates banks to ensure they are financially sound and prudently managed, says it can only try to ensure that they handle consumer complaints fairly and efficiently. It cannot intervene in commercial decisions, investigate the cost or quality of bank services, or compel banks to pay compensation. In any case, consumer protection is difficult to reconcile with responsibility for oversight of the monetary system.
Legislators have long called for a banking sector ombudsman. After the minibond scandal and financial crisis, the government adopted the suggestion for discussion. It remains to be seen if it is included in a regulatory reform consultation paper due out soon. It may not be the perfect solution, but would at least give unhappy customers a chance to air their grievances and resolve problems.