Who will enforce Supreme Court ruling on credit card interest rates?

SOMEBODY SENT ME A COPY OF A 2009 decision of the Supreme Court’s Third Division that surprisingly did not seem to generate the interest it deserved, particularly from credit card holders.

The decision (http://sc.judiciary.gov.ph/jurisprudence/2009/ september2009/175490.htm), promulgated on Sept. 17, 2009, involved a complaint by Ileana Macalinao against penalty charges imposed by the Bank of the Philippine Islands (BPI) for her credit card’s unpaid balance.

Inquirer columnist Raul J. Palabrica Jr., a lawyer, wrote about the Supreme Court decision (G.R. No. 175490), penned by Associate Justice Presbitero J. Velasco Jr., in his column on Nov 6, 2009.

Raul wrote: “The credit card agreement (between BPI and Macalinao) states that balances that remain outstanding after the stipulated payment date shall bear interest at the rate of 3 percent per month and an additional penalty fee equivalent to 3 percent per month.

“BPI sued Macalinao at the metropolitan trial court for the unpaid amount, plus 3.25-percent finance charges and late payment charges of 6 percent, or a total of 9.25 percent a month, which is equivalent to 111 percent a year.”

BPI maintained that the charges were “reasonable as the same are based on the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card.”

But the high court said: “We are of the opinion that the interest rate and penalty charge of 3 percent per month should be equitably reduced to 2 percent per month or 24 percent per annum.”

The Supreme Court said: “We need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates of 3 percent per month and higher are excessive, iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary to morals, if not against the law.”

It added that while the Bangko Sentral ng Pilipinas C.B. Circular No. 905-82 dated Jan. 1, 1983 “effectively removed the ceiling on interest rates for both secured and unsecured loans, regardless of maturity, nothing in the said circular could possibly be read as granting carte blanche authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead to a hemorrhaging of their assets.”

Concurring with the decision were Associate Justices Consuelo Ynares-Eduardo B. Nachura and Diosdado M. Peralta.

Covers all cards

I asked Raul for clarification if the high court’s ruling on interest rates covered both original interest charged on credit card use, as well as penalty charges for nonpayment. He said it applied to all interest charges and cited the relevant portion of the decision: “We (justices) are of the opinion that the interest rate and penalty charge of 3 percent per month should be equitably reduced to 2 percent per month or 24 percent per annum.”

My other question to Raul was if the ruling on interest charges applied to all credit card issuers, including multinationals. If I remember correctly, BPI has announced a reduction in its monthly interest rate to less than 3 percent but multinationals, from what I know, still charge 3.5 percent or something, definitely not less than 3 percent.

Raul’s reply: “The Supreme Court ruling applies to all credit cards issued in the country, including those issued by or administered by multinational banks.”

He said cardholders should go “for relief” to “the Department of Trade and Industry, in line with its mandate on consumer protection.”

The dis-rewarded

A few days before May ended, I got a text message from Smart informing me that I had over 21,000 reward points that I had to redeem immediately because they would expire in June. I was told that for every 5,000 points I could get 100 free text messages.

I asked if I could exchange my reward for something else but I was told substitution was not allowed. So I sent four text messages to claim 400 free text messages (they would not accept one message to claim all 400).

Every text message got the reply that I would have my freebies within 48 hours. It did not happen. I got the rewards three or four days after I sent a text message to redeem them.

Still, I was happy to have 400 free text messages. But a few days into June, my balance of 388 free messages suddenly vanished. When I asked why, I was told the freebies also expired in June. Now all I want is for Smart to tell me how I earned those “reward” points so I can stop doing what I was doing to get them. With all the aggravation being rewarded caused me, I would rather be un-rewarded instead of being dis-rewarded.

Send letters to The Consumer, Lifestyle Section, Philippine Daily Inquirer, 1098 Chino Roces Ave. cor. Mascardo and Yague Sts., 1204 Makati City; fax 8974793/94; or e-mail lbolido@inquirer.com.ph. –Linda B. Bolido, Philippine Daily Inquirer