Whenever a credit card bill payment cheque bounces, a case is filed under The Negotiable Instruments Act, 1881. And when there is a failure in electronics payments due to insufficiency of account balance, a case if filed under The Payments & Settlements Act, 2007. It was noted from the data released of SBI Cards IPO prospectus that many cases were filed under The Negotiable Instruments Act, 1881 and Payment and Settlement Act, 2007. The cases were filed due to insufficiency of funds.
The consequential measure taken by SBI is to block the accounts of customer . On default, a credit card company sends a notice to the customer asking for payment within 30 days of default. If not paid, a case can be filed. After a period a 6 months, the defaulted accounted is transferred to a recovery pool. The note to the prospectus stated that “accounts charged off post 191 days from payment due date are classified as recovery pool / post charge-off bucket” . There is also a possibility the customer shall be black listed by the rating agencies like CIBIL. The punishment provided in the acts mentioned above is jail up to 2 years and a fine of twice the amount dishonored.