House panel wants cap on credit card charges

MANILA, Philippines – The House committee on banks and financial intermediaries is proposing for the country’s central bank to regulate penalties charged by credit card companies.

On Tuesday, November 18, the committee gathered banking industry stakeholders to discuss House Bill 4861, known as “An Act to Regulate the Philippine Credit Card Industry.”

The measure would “put a cap” on penalties so consumers are protected from paying expensive charges, Batangas 3^rd District Representative Nelson Collantes said.

Collantes, chair of the committee, said they also intend to include lending institutions in the measure “because it is not only the credit card companies that provide loans.”

The regulation of charges imposed by lending institutions is needed as stipulated by the country’s Usury Law, where section 1 of the code states that the legal rate of interest is 6%, Collantes said.

Included in the bill are provisions for the Bangko Sentral ng Pilipinas (BSP) to have supervisory powers over credit card issuers and acquirers.

“BSP will regulate penalties and other charges and will determine what is onerous and expensive,” Collantes told Rappler.

At present, calculations for late payments for credit card charges vary from one bank to another.

Based on published rates on their websites, BDO charges 5% or P300 ($6.67*), whichever is higher.

Citibank charges late payments 6% of the minimum due or P500 ($11.11), whichever is higher.

HSBC also charges minimum due of P500 ($11.11) but on a 7.5% charge, whichever is higher.  

In August, the BSP laid stern rules on commercial banks and banned them from issuing pre-approved credit cards.

The issuance of pre-approved cards is among the top 5 complaints on credit card operations despite a 2010 ban by the BSP.

With the latest House proposal, Elmore Capule, BSP general counsel, said it would empower them to regulate the credit card companies.

However, regulating the late payment charges imposed by the banks will need to undergo a market survey, Capule explained.

“We have to look at the market factors before we regulate. It’s not automatic,” Capule said during the sidelines of the committee hearing.

Expectedly, the bid to put a cap on late payment charges is not welcomed by credit card companies.

“The penalties are meant as a deterrent for card members. It’s something we really want as high as possible. Otherwise, they will keep on becoming delinquent,” said Alex Ilagan, executive director of the Credit Card Association of the Philippines.

There were at least 3 million credit cardholders in 2010, according to the Congressional Policy and Budget Research Department.

Apart from high interest rates, concerns among cardholders include frauds and scams. – Rappler.com

Hand holding various credit cards image from Shutterstock