By Lee C. Chipongian
The Bangko Sentral ng Pilipinas (BSP) has issued a circular for the establishment and operations of non-bank credit card issuers such as bank subsidiaries or affiliates, and financing/lending companies if they could show P100 million in capital at least to expand the credit card industry.
The minimum capital requirement is lower compared to an established bank offering credit card products, which for commercial banks with no universal banking license is between P2 billion and P15 billion, and P1 billion for thrift banks if based in Metro Manila.
In BSP Circular No. 1003 signed by Deputy Governor Diwa C. Guinigundo as officer-in-charge, the guidelines for non-banks applying to become credit card issuers were laid out according to the provisions of the Philippine Credit Card Industry Regulation Law or Republic Act No. 10870, which was approved in July 2016. The law firmly placed all credit card issuers’ supervision in the hands of the BSP who can fine or put to jail violators of RA 10870.
As a general policy, Guinigundo said the implementing rules and regulations or IRR set by the BSP follows the objective of the new law which was aimed at developing the credit card industry to make “credit readily available to all Filipinos” but only in a “fair and sound consumer credit practices”.
“The BSP shall foster the development of the credit card industry to make consumer credit readily available under conditions of fair and sound business practices aligned with global best practices,” Guinigundo said in the circular memo. He added the BSP “envisions effective and efficient delivery of credit card services that encourages transparency and competition.”
RA 10870 was very specific on consumer protection, particularly on billing complaints, the appropriate manner of collection, and the use of third party collection agents and the communication of credit card debt collection. These are the top complaints of credit cardholders lodged with the central bank.
With the opening of the credit card market space for additional non-bank credit card issuers, the BSP is doubly strict in imposing rules to ensure requirements will only allow those eligible, not just because they have complied with the minimum capital requirement of R100 million. One of the requirements is that the officers who will be in-charge of the non-bank credit card operations have actual experience of at least two years in a bank or quasi-bank as in-charge -or at least as assistant-in- charge).
“The directors, officer-in-charge of the credit card operations and the managerial staff must comply with the fit and proper rule prescribed under existing law/rules and regulations,” said the BSP.
The non-bank entity should also have in place a comprehensive risk management system approved by its board of directors appropriate to its operations, characterized by a clear delineation of responsibility for risk management, adequate risk measurement systems, appropriately structured risk limits, effective internal control and complete, timely and efficient risk reporting systems, the BSP stated in the circular.
Before issuing the circular last week, the BSP has announced that it has approved the IRR in early May, noting the potential for expansion in light of the current economic growth, the country’s demographics and the increasingly digital payment system.
The IRR is basically the framework for the entry of new players in the credit card business. More players will encourage transparent and competitive interest rates, innovative products and improved services.
The central bank monitors and supervises 115 non-bank financing companies. Non-banks with quasi-banking functions also include investment houses with or without trust functions.
There are eight million credit cards issued in the Philippines at the end of 2017.