Banks and other financial companies will have to follow a 12-percent cap on interest rates on credit card payments under a bill that is nearing approval by the Senate.
The bill has been endorsed for plenary deliberations by the committee on banks, financial institutions and currencies, chaired by Senator Francis Escudero, and the committee on trade and commerce, chaired by Senator Mar Roxas.
The bill also prohibits banks and credit card firms from compounding the interest rates for transactions.
“When our people have no other recourse but to use their credit cards to pay tuition, buy essential goods, and even pay power and phone bills, then there is a need to protect them from volatility in the market, especially during these difficult times,” Escudero said.
The bill, tentatively called “Credit Card and Other Access Device Act of 2009,” provides that interest rates imposed on credit card purchases and cash advances shall in no case be higher than 1 percent per month or 12 percent per annum.
The bill also seeks to impose a ceiling on the surcharges or penalties charged by credit card companies to l percent per month on unpaid debts. In both instances, credit card companies are prohibited from compounding interest charges.
“Compounding the interests, surcharges and penalties of credit card debts is the main reason many of the credit card users are now neck-deep in debt. This is one way of helping them out of the debt trap,” Escudero said.
The neophyte legislator from Sorsogon said that a key provision of the bill would require credit card companies to inform their cardholders of the consequences of paying only the “minimum payment due.”
He said companies were required to print in the billing statements the words “Minimum Payment Warning: Making only the minimum payment will increase the amount of interest that you pay and the time it will take to repay your outstanding balance.”
“This includes information on the number of years and months that it would take for the cardholder to pay the entire amount of that balance if he or she pays only the required minimum monthly payments,” the senator said.
The bill also requires companies to inform its consumers the total cost that would be paid by the cardholder if he or she pays only the required minimum monthly payments, assuming no further advances are made. –Fel V. Maragay, Manila Standard Today
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