OFWs need protection from credit card abuse

Close to half of the reader-reactors to my series on sky-high credit card charges are overseas Filipino workers (OFWs). That’s because their families back home buy on credit and pay upon receipt of repatriated salaries. More than that, OFWs and kin are most vulnerable to card issuers’ gimmicks. They receive from the mail “pre-approved” extension cards for dependents. Restaurant and gas station freebies entice them to make more and more credit purchases. Unknowledgeable in credit discipline, they spend freely even on costly nonessentials, with the breadwinner-OFWs’ consent to make up for absence. But what if the salary suddenly is delayed, or sickness befalls the OFW abroad or a child at home, or the bank statement is late? That’s when trouble begins.

OFWs and families are not fully informed of credit terms. Often they forget that there’s a 3.5-percent monthly interest, plus another 3.5-percent monthly penalty for delayed payments, on top of flat fees. Card issuers do not even say that such monthly rates are compounded. They get away with it because the regulatory Bangko Sentral ng Pilipinas lets them. The BSP does not enforce its policy of full disclosure; nor does it protect cardholders against harassment by collection agents. If the BSP does not tell cardholders in the Philippines that there are Supreme Court rulings against usurious charges, more so are OFWs left in the dark.

The latest such SC decision was in September 2009 (see http://sc.judiciary .gov.ph/jurisprudence/2009/september2 009/175490.htm). In it the high court reiterates past rulings limiting monthly credit card interest to only 1 percent, and penalty to another 1 percent. It also stresses that interest and penalty should each be only 12 percent a year, meaning not compounded. SC rulings are part of the law of the land. But the BSP and its governing Monetary Board have not issued rules to implement the SC verdicts. In anyone asks them why, they say that the rulings are case-to-case, pertaining only to the litigants. It’s as if the BSP- and MB do not see that 7-percent interest and penalty a month, or 84-percent a year is, as the SC says, “exorbitant, iniquitous, excessive.” With such rates, OFWs and their families fall into the debt trap.

OFWs are hailed as modern-day heroes for the remittances they send home that keep the economy afloat. Yet the government neglects their financial welfare. A recent survey, reported in gulfnews.com, proves that OFWs are most prone to the debt trap. It turns out that 85 percent of foreign workers in the United Arab Emirates, mostly Filipinos and Indians, are deep in debt and landing them in prison. The International Swiss Debt Management Consultancy cites OFWs with a salary of 15,000 dirham but 250,000 dirham in hock. “Especially Filipinos go absolutely crazy with borrowing enormous amounts compared to the salary they earn,” notes Steve Gregory, managing partner of Holborn Asset financial advisory in Dubai. “It’s a huge mess. Individuals, even on low salaries of 6,000 dirham, were able to get eight credit cards from different banks, including platinum, and max them out. Gregory analyzes it as partly cultural, with Filipinos willingly guaranteeing one another to ease the hardship of working in a strange land. But when one fails on the payments, the guarantors suffer as well from the banks and the police. About 120 female foreign workers were in jail for bouncing checks at the time the survey was made.

If the OFW-heads of families fall into the debt trap, more so their kin back home. The BSP would do well to teach them, and all the five million or so other cardholders, credit discipline. Part of it would be to spread the news about the SC decisions against usurious credit charges. Another part would be to alert them that, by the Credit Card Association of the Philippines’ own admission, good payers are made to subsidize the losses from bad payers. Yet another part would be to warn them against credit issuers who practically push the cards into the hands of mall shoppers. –Jarius Bondoc (The Philippine Star)