Bill seeks to limit credit card rates

MANILA, Philippines –  A party-list congressman filed Friday a bill that seeks to limit the interest rate being charged by credit card companies to one percent a month or 12 percent a year.

At present, these companies charge 2.5 percent to 3.5 percent a month, or from 30 percent to 42 percent a year.

In filing House Bill 1561, Rep. Raymond Mendoza of the Trade Union Congress of the Philippines said there is a need to protect credit card users from exorbitant rates being charged by card issuers.

“With penalties, late payment fees and other compounding charges, the rate is more than what 5-6 operators charge,” he said.

He was referring to usurers, who usually charge a 5-6 rate, which is equivalent to 20 percent. But this rate is good for one month, sometimes less, which means it translates to 240 percent a year.

Mendoza said credit card issuers should follow the ruling of the Supreme Court in the case Ileana Macalinao vs. Bank of Philippine Islands, which was promulgated on Sept. 29, 2009.

He quoted the ruling: “We are of the opinion that the interest rate and penalty charge…should be equitably reduced to two percent per month or 24 percent per annum.”

He said under the decision, stipulations about “excessive, iniquitous, unconscionable and exorbitant rates are void for being contrary to morals, if not against the law.”

Mendoza’s bill sets an interest rate cap of one percent a month or 12 percent a year without compounding.

An additional one percent could be charged for penalties and surcharges, also without compounding.

There would also be no fee for exceeding the credit cardholder’s limit.

“With the growing number of credit card users, it is only just that their rights are protected and that the laws governing the industry are laid down in black and white and are properly implemented,” Mendoza said. –Jess Diaz (The Philippine Star)