BSP bucks cap on credit card charges

MANILA, Philippines –  The Bangko Sentral ng Pilipinas (BSP) is against proposals in the House of Representatives to put a cap on interest rates that credit card companies charge their customers.

BSP Deputy Governor Nestor Espenilla told the House committee on banks and financial institutions yesterday that they would rather that rates be determined by market forces.

“We believe it would be better for card holders if the market and competition among banks and card issuers would determine rates,” he said.

Cagayan de Oro City Rep. Rufus Rodriguez, one of several congressmen seeking a limit on credit card rates, said the BSP should impose some regulations in view of the phenomenal growth of the industry in terms of the number of cardholders and the peso value of their transactions.

“The BSP should take the cue from the US Congress, which had to pass a law to institute reforms in 2009 when credit card receivables reached nearly $1 trillion, a level that had American lawmakers worrying on its effect on their economy,” he said.

Rodriguez said the US law “promotes transparency and consumer protection, which the BSP should also advocate and pursue.”

Espenilla said recent regulations issued by the BSP were patterned after reforms undertaken in the US.

“We have banned the issuance of pre-approved credit cards and required banks and issuers to be more transparent on the terms and conditions governing the use of the cards,” he said.

He informed the committee that a total of 6.7 million credit cards have been issued.

“But the number of credit card holders is lower than that since many have two or more cards. We estimate that there are three million to four million Filipinos using credit cards,” he said.

As of the end of 2010, he said the amount of outstanding credit card receivables reached P143 billion.

“In terms of turnover, it is four times that amount, which means it is at least P500 billion. That is the magnitude of unsecured credit extended to cardholders,” he said.

These cardholders would surely have paid higher interest rates if they went to the “informal market like usurers,” he stressed. –Jess Diaz (The Philippine Star)