Bill seeks to cut credit card monthly interest rates to 1%

MANILA, Philippines—Seeking to “tame” credit card companies, a lawmaker on Monday proposed to slash the current three percent monthly interest rate they charge card holders to one percent.

In a resolution, Quezon City Representative Winston Castelo also said that credit card holders with debts, delinquencies, or defaults in payment will be charged with a monthly penalty rate of one percent, down from the current three percent.

“There is a need for a firm legal basis to tame credit card companies (and for them to) exercise a little bit of their corporate social responsibility,” he said.

The interest rate and the penalty rate, each reaching up to 36 percent per month, are conditions imposed by credit card companies on holders of credit cards.

In his resolution, Castelo cited existing laws and regulations that impose lower rates on interest on loan, such as the Central Bank Circular 905-82 wherein the “rate of interest for the loan or forbearance of any money, goods, or credits and the rate allowed in judgments, in the absence of express contract as to such rate of interest, shall continue to be twelve percent (12%) per annum.”

He also noted the 2009 Supreme Court decision on the Macalinao vs Bank of the Philippine Islands, which stated that “the interest rate and penalty charge of 3 percent per month should be equitably reduced to 2 percent per month or 24 percent per annum.”

In the decision, the high court said: “We need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates of 3 percent per month and higher are excessive, iniquitous, unconscionable, and exorbitant. Such stipulations are void for being contrary to morals, if not against the law.”

But the Quezon City lawmaker said that the high court did not explicitly order the bank to reduce their interest rates, saying “it is Congress or Bangko Sentral ng Pilipinas that could prescribe the rates.” –Lira Dalangin-Fernandez, INQUIRER.net