January 27, 2010
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News: Pilipinos Receive Warning on CC Spending
The Bangko Sentral ng Pilipinas' (BSP) Financial Consumer Affairs Group (FCAG) wants to remind credit card consumers that there are no BSP regulations that cap interest rates or fees. The absence of any such rule makes it possible for credit card companies to increase rates and fees without provocation making it important that cardholders use their cards wisely. The Central Bank of the Philippines had adopted the Circular No. 905 rule in 1982 that imposed ceilings, however, the provision was rescinded in 1996 and the ceiling on credit card interest rates was removed. Although the Monetary Board does have the authority to reenact the rule when necessary for the benefit of the economy, they do not feel at this time that it is necessary.
For the time being, the Monetary Board feels the banks and credit card companies have been acting appropriately in disclosing interest rate and fee policies to cardholders. Recently the Supreme Court did make a decision which lowered the maximum allowable interest rate and fees on credit card balances, however, customers are still required to appeal to the courts. There are no set guidelines and the Supreme Court must examine each individual case separately to determine if any unconscionable action is being taken on the part of the lender.
An example of what the Supreme Court has determined exists in the case where a credit card company had advertised a 3 percent a month or 36 percent a year rate was unfair. The High Tribunal court ruled that the company must reduce its fee to 2 percent a month or 24 percent a year. In making their decision, the Supreme Court looked at the cardholder's payments and determined that the fees would be harmful. Looking to protect cardholders, Deputy Director Ma Belinda Caraan, of the BSP's FCAG, is warning cardholders to be responsible with their spending. Consumers should pay on time to avoid late fees and possible interest rate increases.