Firms back proposed cap on finance charges

by Louella Desiderio (The Philippine Star), 26 Aug 2020

MANILA, Philippines — The Management Association of the Philippines (MAP) is supporting the proposal of the Bangko Sentral ng Pilipinas (BSP) to cap credit card finance charges as this, along with the 60-day moratorium on loan payments, would help struggling enterprises and consumers cope with the coronavirus disease 2019 or COVID-19 pandemic.

“The BSP Governor’s proposal, coupled with the 60-day payment deferment under the Bayanihan to Recover as One Act, will provide big relief to businesses and individuals using credit cards, many of whom have found themselves jobless as a result of the pandemic,” MAP president Francis Lim said in a statement yesterday.

The BSP earlier said it plans to impose a cap on finance charges on credit card loans.

In its draft circular, the BSP said it is looking at a maximum finance charge equivalent to an effective annual interest rate of 24 percent for credit card cash advances and installment purchases.

Under BSP’s plan, the cap would be reviewed every six months.

“We understand that the Bankers Association of the Philippines is supportive of the proposaal and that is a clear indication how the banking industry is bending over backwards to help our countrymen during this critical period,” Lim said.

Earlier, he said MAP, which initially pushed for a 30-day moratorium on loan payments, welcomed the 60-day reprieve under the proposed Bayanihan 2 or Bayanihan to Recover As One Act approved by Congress.

He said the 60-day reprieve would be a good compromise, provided it would no longer be extended.

He also said the moratorium should exclude insurance and pre-need companies as they may be challenged to service claims, particularly deaths related to COVID-19.

Pre-need companies, meanwhile, have to cater to medical and hospitalization claims of COVID patients, as well as tuition of students.

Meawhile, banks and credit card issuers are supporting the plan of the BSP to put a cap on finance charges for cash advances and installment transactions to cushion the impact of the pandemic on borrowers.

In a joint statement, the Bankers Association of the Philippines (BAP) and Credit Card Association of the Philippines (CCAP) said they are supportive of the BSP’s plan to set interest rate cap on credit card installment payments and cash advances.

“We welcome this initiative of the BSP and hope that this collective effort of the banking industry would help alleviate the flight of our consumers, particularly the credit card holders especially during this challenging times,” BAP president Cezar Consing said.

Consing is also president and chief executive officer of Ayala-led Bank of the Philippine Islands (BPI).

The industry expects the default rate of the industry to double from the pre-pandemic level of four percent.

There are around 11 million credit cards issued with seven million credit card holders in the Philippines with a credit limit of about P30,000 and average transaction of P5,000. — Lawrence Agcaoili