Solon wants cap on credit card charges

A lawmaker is seeking to put a cap on the interest rates charged on deferred payments made on credit card purchases.

In his privilege speech last Monday night, Cagayan district Rep. Jack Enrile pushed for a one percent cap per month on the interest rates charged on deferred payments made on credit card purchases.

He cited that as of the present, the credit card industry is processing some P1 billion worth of transactions annually.

“I call on Bangko Sentral ng Pilipinas Gov. Amado Tetangco, to make consumer protection and financial literacy a cornerstone of his second term in office,” said Enrile.

“Today, the credit card industry, consists of some 15 major credit card companies that process over P100 billion worth of credit card transactions on an annual basis. They facilitate the transactions made by over 4 million credit card holders and 30,000 or more retail and service establishments nationwide.”

Enrile noted that as of the records of the Bangko Sentral ng Pilipinas (BSP) credit card receivables as of the third quarter in 2010 amounted to some one P134 billion.

“Even if the 12 percent loss ratio is deducted from this amount, and the average three and a half percent interest rate is applied to the remainder, credit card companies still rake in a minimum of P458 million a month in interest income alone – without the other fees, charges and penalties which even this representation is at a loss to explain because again, it all boils down to what formula is being applied,” he explained.

Enrile claimed that he received reports that the credit card companies charge a penalty for the late payments.

But he claimed that the interest was slapped not only the amount one has not paid for the month, but also on any additional amounts charged for the incoming months. “The reason that the credit card company gave was that as soon as anything new is charged, those new charges form part of the card holder’s unpaid amount. Worse than this, no one in the credit card company can explain to the cardholder how the penalty charges were computed,” Enrile said.

He also said that he was also approached to also investigate on the methods and practices of collection agencies “which border on outright terrorism and coercion — to the point of threatening to expose the extent of the card holder’s obligations to their neighbors and co-workers as a means to collect payment.”

“Have credit card holders been informed of the consequences of paying only the “minimum amount due” as stated on their statement of accounts? Are they aware of how the interest rates charged on their outstanding balances are computed? Were they informed that the late payment charges will not only be applied against their unpaid balances, but also to the purchases that they make until payment has been made?” said Enrile.

“Therefore, let us cap interest rates to 1 percent per month. Let us help our consumers, entrepreneurs, and small merchants by insisting that the Bangko Sentral ng Pilipinas ensure and promote accountability, responsibility and disclosure in the banking and credit card industry,” he said, reminding Tetangco of a Supreme Court ruling has been consistent that the “interest rates of 3 percent per month or higher are excessive, iniquitous, unconsionable and exorbitant.”  –Charlie V. Manalo, Daily Tribune