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)
