TUCP urges ceiling rate on credit card charges

PRESS RELEASE

HON. RAYMOND DEMOCRITO C. MENDOZA            14 October 2010
Trade Union Congress Party (TUCP Party-List)
Room 204 South Wing, House of Representatives, Batasan Hills, Quezon City 1126
Tel/Fax: (632) 951-3011

TUCP urges ceiling rate on credit card charges

Trade Union Congress Party (TUCP Party-List) Rep. Raymond Democrito C. Mendoza lambasted credit card companies for imposing excessive rates to cardholders from 2.5 to 3.5% per month or 30 to 42% per year.

TUCP filed House Bill 1561 which seeks to set a non-compounding 1% monthly interest rate (12% yearly) as the ceiling for all credit card companies including hidden charges such as minimum payment, late payment, over the limit, and cash advance charges.

“There is no reason why the credit card corporations should collect more than this amount. Banks are charging an average annual interest of 20% per annum while credit card interest rates can reach until 42%,” Mendoza noted.

“With penalties, late payment fees and other compounding charges, the rate is more than what “5-6” operators charge”, he added.

The bill also prohibits imposing charges exceeding the cardholders’ credit limit.

Mendoza said banks and card issuers often use Central Bank Circular 905-82 as scapegoat in charging its consumers more than 1% monthly interest rates and stipulated charges as mandated by the Anti-Usury Law.

The Supreme Court ruled in 2009 however that the stipulated interest rates of 3% per month and higher are “excessive, iniquitous, unconscionable and exorbitant and that such stipulations are void for being contrary to morals, if not against the law.”

TUCP also criticized credit card companies for deliberately hiding the essential information that their card holders must know so that they could make prudent decisions regarding their finances.

“Use of credit card has become a lifeline for many consumers but has also become burdensome to many who are caught unaware of the charges,” said Mendoza.

The bill also affirms provisions of RA3765 of the Truth in Lending Act which mandates full disclosure of the charges imposed on creditors.

“No other costs shall be imposed other than the legal interest rates except for reasonable attorney’s fees and expenses of collections completely disclosed to, sufficiently understood by and voluntarily agreed to by an applicant for credit card facility,” the solon stressed.

“With the growing number of credit card users, it is only just that their rights are protected and that the laws governing the industry are laid down in black and white and are properly implemented,” Mendoza said.

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