The Agricultural Bank of China (ABC), one of the country's top
four state-owned banks, had no idea that its decision to charge for
the use of its once-free debit cards would engender a major public
outcry.
The protests were ignited on March 18, when the bank posted a
notice in its outlets across the country saying that owners of its
debit card would be automatically charged 10 yuan (US$1.20)
annually as of July 1.
Customers who have deposit accounts at the bank were given debit
cards free of charge, and they had not been told that they were
going to be charged for the service.
Soon after, the China
Construction Bank (CCB) and the Industrial and Commercial
Bank of China (ICBC) followed suit, separately announcing the
dates their customers would have to start paying for the
service.
At a time when almost every urban dweller has a handful of cards
issued by a variety of banks, the charges will bring a considerable
unexpected expense.
"The housing fund card of the CCB, the paycheck cards of ICBC
and ABC, the cards for water and power payments." Ms. Sun, who
lives in Beijing's Chaoyang District, thumbed through the dozen
bank cards that she owns.
"If every card starts charging annual fees, how much am I going
to have to pay?" she complained.
In some bank outlets in Guangdong, Shandong and Zhejiang
provinces, consumers have been reportedly lining up to have their
less frequently used bank cards canceled.
What makes the public angry is not only that they have to pay,
but also that the banks have broken their promises.
"It's like someone invites you for a drink, then asks you to
pay," one cardholder said.
A lawyer in Changsha, the capital of Hunan Province, where the
free bank card service was terminated last year, has filed lawsuits
against ABC and ICBC, accusing them of deducting money from his
account without prior notice or agreement.
A local court in Changsha has accepted the case and the hearing
will begin soon, according to the court.
The China Consumers' Association has also registered a strong
complaint, describing the change in the two banks' debit card
agreements as aggressive and "peremptory."
According to Wang Qianhu, the association's complaint and legal
affairs director, the fourth article of ABC's debit card agreement,
made public in July 2002, made it clear that the bank's card has
"no expiration date and no annual charge."
Now, without asking for its customers' consent, the bank has
unilaterally added the charge. "They have violated the Contract Law
by doing so," Wang said.
The Consumer Protection Law prohibits businesses from setting
unfair policies by simply posting a notice.
"The amended articles that ignore the consumers' right to be
treated fairly, to know the truth and to choose, are clearly
peremptory," said Wang.
He also drew attention to Article 15 of ABC's current debit card
agreement, which says the agreement has binding force, no matter
whether cardholders are aware of the amendments to the articles or
not.
"The agreement between the bank and consumers is a contract
between two equal civil parties, not an administrative notice as
the bank seems to think," he said.
Some critics say that the banks used to live mainly on the
difference between deposits and loans. In order to take a larger
share of the market, they scrambled to offer free card
services.
Now that profits generated by the deposit-loan gap are
shrinking, the banks have changed their tune and betrayed their
promises, according to these critics.
ABC had issued 93 million debit cards by the end of 2002, and
ICBC 84 million by the end of last year. If they charge 10 yuan per
card, the two banks will have an additional annual income of 1.7
billion yuan (US$204 million).
But the banks argue that charging 10 yuan a year for each card
will barely cover actual costs, let alone make a profit.
There are the costs of the cards themselves, the card-making
machines, the computer system for handling transactions, the
automated teller machines and the personnel required.
"Actually, the annual fee of 10 yuan per card is far from enough
to cover the real costs," an official with the agricultural bank
said.
Insiders say the banks began to charge partly to reduce the
number of so-called sleeping cards, which serve small deposits and
are seldom used.
As each card's information has to be stored in the banks'
databases, the sleeping cards, believed to account for 80 per cent
of all cards, occupy large amounts of computer system resources,
thus reducing the speed and quality of transactions.
If a card account does not contain enough to pay the annual fee,
the card will not be cancelled, but its data will be stored in a
special file so that the computer system does not have to count it
every time it searches the database.
"Whenever the card owner deposits more money into the account,
the card will be reactivated," a bank official explained.
The banks do not agree that their dropping the free service was
peremptory. They say the China Banking Regulatory Commission
authorized it.
The commission and the National Development and Reform
Commission issued a banking service pricing guideline last year,
authorizing the banks to set their own prices for their
services.
But Wang Qianhu said this makes no sense.
"The banks did not exercise their right to set a charge when
offering the cards to consumers. It's unreasonable they are now
trying to make the consumers pay for the consequences of the banks'
own mistake," he said.
The China Consumers' Association will hold a press conference
before July 1 to list the banks' violations of consumers'
rights.
Liu Junhai, a researcher with the Law Study Institute under the
Chinese Academy of Social Sciences, pointed out the banks' mistake
in legal terms.
"If the banks change their agreements with the consent of the
central bank but not of the consumers, they are only free from
administrative responsibility, but not the responsibility to uphold
their contracts with consumers," Liu said at an interview with
CCTV.
He encouraged consumers to file a class action complaint to
protect their rights.
He also suggested that the consumers' association could
negotiate with the representatives of the major banks on the rights
and obligations of both sides.
"Either side that wants to change the contract must get the
agreement of the other side," he said.
The consumers seem to be winning in the ongoing battle, as the
banks have moved to make a compromise adjustment.
The bank will no longer "cut it through with one stroke of the
knife," Beijing Youth Daily quoted an anonymous official with AB's
main Beijing branch as saying.
They maintain that the policy to charge from July 1 will not
change. But only cards issued after that date will be charged.
Current cardholders will not be charged for one more year.
Preferential treatment will be given to some special cards.
Cards specially designed for students, salary payment cards, and
vehicle tax payment cards will be exempt from the annual fee.
"The service fee for the salary payment cards and vehicle tax
cards should be paid by the entrusting parties, in this case
employers and the tax authority," the official explained.
"The students have no income, so they will enjoy a free
service."
Although the head office of AB did not confirm such adjustments,
it did admit that it was pondering some changes to the initial
plan, as the heads of local bank branches across the country are
convening in Beijing to discuss bank-card business at present.
"We might consider different policies in different places, as
each place has its own social and economic conditions," an official
with the bank card department of ABC told China Daily.
ICBC is also reportedly considering grouping its customers and
services into different price categories, including a free
category.
"The move is a goodwill concession by the banks in response to
its customers' attitudes," commented Wang, from the consumers'
association.
"Actually we don't think the banks should be forbidden to charge
for their services, but we need a fair and equitable legal
agreement."
(China Daily HK Edition April 9, 2004)