Is your credit card overcharging you?

Does your credit card charge you interest and penalty of more than a percent each per month? If yes, then know that you are being overcharged.

The Supreme Court had so ruled last year unanimously in a division. It called “exorbitant, iniquitous, excessive” exactions on credit cards above one-percent interest and one-percent penalty, or a combined two percent, per month. (See http://sc.judiciary.gov.ph/jurisprudence/2009/september2009/175490.htm)

The ruling stemmed from a case filed 2006 by a credit card subsidiary of a major bank against a client. The metropolitan and regional trial courts had ruled for the card company charging monthly three-percent interest plus three-percent penalty. So did the Court of Appeals, although it revised the exactions to 1.5-percent interest and 1.5-percent penalty per month. The SC reversed the interest and penalty rates, however.

The SC ordered the card issuer to re-compute its excessive billing. The new bill was to be based on the highest allowable interest rate of one percent per month, or 12 percent per year.

The SC dismissed such arguments as:

• there is no longer any anti-usury law, and

• the card holder had agreed to the company’s terms and conditions, including the percentages to be charged.

On the first matter, the ruling stated: “We need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates of 3% per month and higher are excessive, iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary to morals, if not against the law. While Central Bank Circular No. 905-82, which took effect on January 1, 1983, effectively removed the ceiling on interest rates for both secured and unsecured loans, regardless of maturity, nothing in the said circular could possibly be read as granting carte blanche authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead to a hemorrhaging of their assets.”

On the second matter, the SC ruled: “Since the stipulation on the interest rates is void, it is as if there was no express contract thereon.”

Banks and credit card companies claim that the decision applies only case-to-case. Yet there is no other way to interpret it than that it covers all cases of overcharging of cardholders. To repeat, the SC “had affirmed in a plethora of cases that stipulated interest rates of 3% per month and higher are excessive, iniquitous, unconscionable and exorbitant.” To insist that the ruling is applicable only to whatever case a bank or credit card company prefers is to fool the cardholders.

The Bangko Sentral ng Pilipinas has the duty to inform the general public of the SC decision. Oddly, though, its financial and credit education programs make no mention of the crucial ruling in any seminar, brochure or website. Should we take this material omission as proof of where the BSP really stands on consumer advocacy?

Sources say the BSP prefers to interpret the SC decision in favor of the banks and card issuers, instead of the consumer. Despite the SC’s clear words to the contrary, the BSP insists that there is no more anti-usury law and the decision is only case-to-case. Neither the BSP nor its policy-making Monetary Board has moved to enforce the SC ruling. That is why banks and card companies continue to rake in billions of pesos in “unconscionable, exorbitant, excessive” fees from the uninformed public. –Jarius Bondoc (The Philippine Star)