Credit card owner refuses to pay bank’s high interest

Dear PAO,

I have a credit card problem. My children were hospitalized early this year so I was not able to make full payments on the amount due on my credit card. I have paid the principal amount but the bank said that the payment has accrued to the interests.

The bank imposed a very high interest, which made my debt four times bigger than the principal. I think that this is not just. Can I refuse to pay the rest of my debt since I have already paid the principal amount? What would be my defense in case the bank files a case against me?

RG

Dear RG,

You cannot refuse payment of your debt even if you believed that you have already paid the principal debt. However, you may go to the bank for a settlement of your debt and it may reconsider your request for such a settlement. If you are not going to pay your debts, the bank will ultimately make the necessary step to collect said debt. It may send you a legal demand stating the amount to be paid, the period within which payment should be made and recourse to court through filing of appropriate case if the payment thereof is not made on time.

If you will not accede to their demand, it may pursue their plan to file a collection case in court in order to collect the amount due. In such a proceeding, you may raise as a defense the failure of the bank to perform its obligation under Republic Act (RA) 3765 entitled “An Act to Require the Disclosure of Finance Charges in connection with Extension of Credits” or the “Truth in Lending Act.”

Under Section 4 thereof, it shall be the duty of every creditor to furnish each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with rules and regulations prescribed by the board, the following information:

(1) the cash price or delivered price of the property or service to be acquired;
(2) the amounts, if any, to be credited as down payment and/or trade-in;
(3) the difference between the amounts set forth under clauses (1) and (2);
(4) the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in terms of pesos and centavos; and
(7) the percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation.

Hence, the failure of the creditor to perform the above obligation may be a defense for the debtor to refuse payment of the finance charges imposed upon the principal amount, which charges include interest, fees, service charges, discounts, and such other charges incident to the extension of credit.
Moreover, such creditor who fails to disclose to any person to whom he has the obligation to disclose the above information shall be liable to him in the amount of P100 or in an amount equal to twice the finance charged required by such creditor in connection with such transaction, whichever is the greater, except that such liability shall not exceed P2,000 on any credit transaction. The creditor shall also be liable for attorney’s fee and court cost as determined by the court (Section 6, RA 3765). Also, the court may also order that the interest imposed would be lowered if the court finds the same to be unconscionable.

Lastly, we wish to remind you that the above legal opinion is solely based on the facts you have narrated and our appreciation of the same. The opinion may vary when other facts are changed or elaborated. –PERSIDA ACOSTA, Manila Times

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