The impact of credit card abuse

Published by rudy Date posted on April 28, 2009

The impact of the move of US President Barack Obama in trying to clamp down on consumers’ credit card abuses can affect the Philippines. After all, we have here billions of pesos in unpaid credit card bills.

The credit card is actually a debt trap, and unless consumers are disciplined enough, it can lead to bankruptcy. I know so many of my relatives and friends in the United States saddled with debts that they have in fact declared themselves bankrupt. Under US laws, once you declare bankruptcy, the court takes over for seven years when all your earnings are forfeited by the courts in payment of your debt.

We don’t have a similar law here. In the Philippines, all the banks can do is to blacklist one’s credit and file suits against him or her. And we all know quite well that court decisions take years. That’s one reason why those misusing their cards would rather accumulate debts in the hundreds of thousands and then default rather than pay the banks.

The trouble here is that banks make it so attractive for consumers to avail of credit cards. In malls, credit card companies have booths and people who give out flyers to shoppers. The use of credit cards is being offered at minimal cost.

If Obama is now lowering the boom on credit card abuse, the Bangko Sentral should also look at banks with billions of pesos in unpaid bills. If these debts are substantial enough, they could threaten the stability of our banking system.

Santa Banana, if you count the amount of interest you pay a month on the use of your credit card (or cards), they amount to 36 percent per annum or even more at 3.5 to 3.7 percent monthly. My gulay, something’s got to give in this situation!

We have a law called the “Anti-Usury Law,” which has actually become a dead law, allowing a maximum of only 12-percent interest on debts. Only the government is now following this law. Banks, for their part, have gone roughshod over it, charging consumers beyond the maximum amount allowed.

Thus, it’s surprising that there’s no move at all in Congress to implement this law. Have the lawyers in Congress all become consultants of banks, which have taken advantage of the gullibility of Filipinos in the use of plastic money, and in process have made the “Anti-Usury Law” obsolete? –Emil Jurado, Manila Standard Today

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