Credit card companies putting up debt restructuring program

By Melissa Luz T. Lopez, Reporter, June 07, 2016, http://www.bworldonline.com/content.php?section=Finance&title=credit-card-companies-putting-up-debt-restructuring-program&id=128647

The Credit Card Association of the Philippines (CCAP) yesterday launched the Interbank Debt Relief Program (IDRP) geared towards offering longer repayment periods or cheaper interest rates for highly indebted cardholders.

“The aim is to improve the chances of these credit card holders to recover financially and eventually restore their credit standing,” CCAP executive director Alex G. Ilagan said during a launch event yesterday at the Bangko Sentral ng Pilipinas (BSP).

Mr. Ilagan said repayments could stretch for as long as 10 years for “severe” cases, while interest rates could go as low as 1.5% monthly, based on the profile of the customer, debt-to-income ratio and other documents.

Credit card issuers Asia United Bank Corp., Bank of Commerce, Bank of the Philippine Islands, Citibank N.A., China Banking Corp., East West Banking Corp., Equicom Savings Bank, HSBC, Maybank Philippines, Inc., Metrobank Card Corp., Philippine National Bank, RCBC Bankard, SB Cards Corp., Standard Chartered Bank, Union Bank of the Philippines, and BDO Unibank, Inc. agreed to participate in the relief program, following discussions led by the central bank.

Citing industry data, CCAP president Jesus Angelo O. Gomez said some P2.32 billion in credit card loans are currently under different restructuring programs among banks, against P14.5 billion in total receivables. The remaining P12.2 billion are charged with regular rates, posting minimal if not zero payments.

There are 8.268 million active credit cards with outstanding loans, rising from 6.584 million in 2009, based on BSP data. Soured debts stood at 6.51% of P222.108 billion total credit card loans in 2015.

Under the program, a customer may apply for restructuring before any of the banks which issued the credit cards, but the bank which holds the biggest debt exposure will act as the lead bank in processing the application.

All pending accounts must be at least six months old, and hold an outstanding balance between P10,000 to P100,000 for all cards. Customers shall submit documents to establish their identity and prove their capacity to settle the loans regularly if given a longer payment period.

Mr. Gomez said the CCAP is eyeing to put up a centralized payment channel for customers to consolidate all payments within the year, though manual payments can already be made through the card-issuing banks.

BSP Deputy Governor Nestor A. Espenilla, Jr. said banks must “prepare” as global interest rates rise, which would likely bring about more credit issues.

Upon approval, all existing credit cards of the borrower will be cancelled until he/she fully settles the restructured loans, based on the IDRP guidelines.

Looking ahead, CCAP’s Mr. Ilagan added that banks are studying to also include unsecured personal loans under the restructuring program.