Chinese banks should take more rigorous risk prevention measures for their credit card businesses to curb rampant credit card fraud, said a notice jointly released by the central bank and the banking regulatory authority yesterday.

A bank card holder withdraws money at an ATM machine at a China Construction Bank outlet in Haian of Jiangsu Province.

Credit card issuers "should prevent the risks by having a more detailed investigation over the applicant's identity and credit record," said the notice by the People's Bank of China and the China Banking Regulatory Commission.

Banks, China UnionPay and the shops they partner with are also encouraged to set up an information share system on their cardholders.

The card issuers are urged to be selective when choosing outsourcing marketing agents and partner stores.

The joint notice was released to address the growing credit card fraud problem in China.

In Shanghai, the Shanghai People's High Court tried four cases for credit card fraud in 2003, and nine cases in 2004.

The number of such cases soared to 44 in the first seven months of 2005.

According to an update from the court, more than half of bank-related lawsuits that local courts handle involve credit cards. Most of them are credit fraud, which is on a rapid rise, said Xiao Bo, a judge at Shanghai Pudong New Area District People's Court.

During the late 2003, several domestic banks, including China Construction Bank and China Merchants Bank, started intensive marketing activities promoting credit cards. To attract customers, some banks lowered the criteria or simplified the procedures for assessment.

Because of this, many customers now find it easier to obtain a credit card. By merely filling in a form with personal information, a successful applicant is granted at least a 5,000 yuan (US$671) credit limit on their card.

To win more customers, some banks allow their branches to issue cards, or even outsource their sales business, making it possible for a client to obtain more than one credit card by applying at a number of different outlets.

"We have been aware of those holes and have had a closer verification of an applicant's identity and credit record," said Xu Chao, a client manager of the credit card centre of China Mingsheng Banking Corp. Xu added that the centre sells 80 per cent of the bank's credit cards and doesn't rely on sourcing companies anymore.

"We will first select companies and institutions with a reliable record as our target customers, and then carry out on-the-spot promotion to their employees," Xu said, noting such marketing is more reliable and efficient.

(China Daily 04/12/2006 page9)

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