Delinquent cardholders need protection too

IT’S not amazing that there are more than seven million credit cardholders in our country (though some estimates say there are only four million plus). In the first place, there are some 11 million overseas Filipino workers (OFWs). Most of them remit money to their families back home. They come home to the Philippines long enough to get their spouses credit cards.

But a strict and honest survey would most likely yield the finding that there are less seven million Filipinos who can afford to comfortably pay a credit limit of P10,000. That is the average credit limit for the lowest paid workers who spend everything they earn on daily survival needs but are still granted credit cards by some banks.

The level of credit card nonpayment in our country is the highest in our region. In our special report on credit cards three years ago, our figure of 25 percent of nonpaying cardholders was disputed by industry sources. But the banks refuse to answer this question. And the 14 members of the Credit Card Association of the Philippines and the association itself do not want to entertain our queries.

Bangko Sentral’s strict rules

The Bangko Sentral ng Pilipinas (BSP) has strict rules governing the credit card industry. The BSP rules for credit card companies classify receivables according to the age or number of days a debt is past due.

Unpaid dues 91 days to 120 days old are classified as “substandard,” 121 days to 180 days are “doubtful” and 181 or more days are classified as “loss.”

Our gross domestic product (GDP) grew by only 0.4 percent during the first quarter of 2009, but consumer loans increased by 18.7 percent during the same period. The Bangko Sentral ng Pilipinas attributed the growth to residential real estate loans and credit card loans, which funded consumption spending.

Consumer loans of universal and commercial banks and thrift banks reached P385.8 billion as of end-March 2009, up from P325.1 billion over the same period in 2008. Residential real estate loans accounted for the bulk, or 41.6 percent of total consumer loans, or P160.4 billion.

Next were credit card receivables with a 27.7 percent share, or P106.8 billion.

If our sources are right and 25 percent of these receivables are in trouble, the amount involved is about P26-plus billion. That cannot trigger a regional much less a global financial crisis, but it is serious enough in an economy like ours which is largely dependent on OFWs.

Could the credit card nonpayment level be a source of worry? Could the huge credit card defaults become the Philippine version of the USA’s subprime mortgage loan crisis, which was the boil that grew into the cancer that enfeebled the American—and the world—financial system in 2008 to 2009—and from which the world is still slowly recovering?

Do the lawmakers realize that there has been a proposal to sell credit card receivables? Sell to the foreign banks?

BSP’s anti-harassment guidelines

The BSP also has guidelines about what credit card companies and banks can and cannot do to pressure delinquent cardholders to pay. But we know, as the stories in this special report and blogs everywhere say, that debtors are harassed, maltreated and abused in wicked ways.

The pending Senate Bill 3534, which is supposed to right the wrongs in the credit card industry, does not contain the commendable protection system the killed bill of Sen. Miriam Santiago gives to credit card debtors. The senators must add those protective provisions, with compensating provisions to prevent habitual debt evaders from being rewarded. For there are honorable debtors who are victims of circumstance. They must not be subjected to humiliation and cruelty by collection agents. –Rene Q. Bas Editor in Chief, Manila Times