Bill requires ‘true cost’ payment disclosure by credit card firms

House approves on final reading

MANILA, Philippines — The House of Representatives has passed on third and final reading a bill that would compel credit card firms to clearly indicate in their billing statements the high price that cardholders would have to pay, should they decide to settle only the minimum monthly amount due, and defer paying off their entire outstanding balance.

“We want cardholders to be fully informed that it will cost them an arm and a leg if they settle only the minimum monthly payment required (by card issuers), which is usually five percent of the full balance,” said House Deputy Majority Leader and Pasig City Rep. Roman Romulo, the bill’s author.

House Bill 4655 proposes to include the following cautionary statement on every card billing statement: “Warning: Making the minimum payment only or any amount less than the total amount due for the billing cycle/period will increase the amount of interest and other charges you pay and the time it takes to repay your balance.”

Romulo said credit card firms have been cleverly pushing consumers to settle only the minimum monthly payment required “precisely because they (card issuers) stand to collect considerably larger interest payments the longer the cardholder keeps a huge outstanding balance unpaid.”

“Our bill will give more meaning to The Truth in Lending Act, which protects the people from lack of awareness of the true cost of credit by assuring full disclosure of such cost, with a view to discouraging the uninformed use of credit to the detriment of the economy,” he said.

“The measure will also advance the State’s avowed policy in The Consumer Act to protect the interests and general welfare of consumers, and to establish fair standards of conduct for business and industry, in this case for credit card firms,” he added.

Romulo’s bill would amend the 1998 Access Devices Regulation Law, or Republic Act 8484.

The bill seeks to include the following repayment information in every card billing statement:

• The number of months (rounded to the nearest month) that it would take to pay the entire amount of the outstanding balance, if the consumer pays only the required minimum monthly payments and if no further advances are made;

• The total cost to the consumer, including interest and principal payments, of paying that balance in full, if the consumer pays only the required minimum monthly payments and if no further advances are made;

• The monthly payment amount that would be required for the consumer to eliminate the outstanding balance in 36 months, if no further advances are made; and

• The total cost to the consumer, including interest and principal payments, of paying that balance in full if the consumer pays the balance over 36 months.

The bill also puts all credit card companies directly under the supervision of the Bangko Sentral ng Pilpinas (BSP). At present, only card issuers affiliated with banks are supervised by the BSP. –Manila Bulletin