Banks, business support BSP's cap on finance charges
Published Aug 26, 2020 05:00 am
Banking and business groups have expressed support to the Bangko Sentral ng Pilipinas’ (BSP) proposed ceiling on credit card receivables’ finance charges to ease the burden on problematic credit cardholders’ increased dues.
BSP Deputy Governor Chuchi G. Fonacier (Bloomberg file photo)
BSP Deputy Governor Chuchi G. Fonacier said the proposed limit on the interest rate that banks and credit card companies charge on credit card debt is a first and should help credit card borrowers affected by the COVID-19 lockdowns.
“This is the first time (that BSP is proposing this), as I recall. This will be a significant help for credit cardholders,” said Fonacier.
In separate statements on Tuesday, the Bankers Association of the Philippines (BAP) and the Management Association of the Philippines (MAP) said they favor and will get behind the BSP’s yet-to-be-approved circular on the setting of a limit to the interest rate on credit card cash advances and installment payments.
“We welcome this initiative of the BSP and hope that this collective effort of the banking industry will help ease the burden of our credit cardholders during these challenging times,” BAP president Cezar P. Consing, also the CEO and president of Bank of the Philippine Islands, said.
The BAP also said that with the Credit Card Association of the Philippines which issued its own statement this week, they are united in supporting the BSP move.
MAP President Francis Lim said the BSP proposal “coupled with the 60-day payment deferment under the Bayanihan to Recover as One Act, will provide big relief to businesses and individuals using credit cards, many of whom have found themselves jobless as a result of the pandemic.”
Lim is also encouraged that member banks of the BAP are supportive of the proposed cap on credit card finance charges. “That is a clear indication how the banking industry is bending over backwards to help our countrymen during this critical period,” he said.
Based on the draft circular posted on the BSP website and still culling comments from the banking community, the BSP is proposing for banks to impose a maximum finance charge of 24 percent annual interest rate for credit card cash advances and installment purchases.
This “maximum finance charge” will be reviewed every six months.
The BSP wants banks and credit card issuers to only charge interest or finance charges “arising from the non-payment in full or on time of the outstanding balance based on the unpaid amount of the outstanding balance as of statement cut-off date”.
As for rate ceilings, the circular said the “rate of interest, including commissions, premiums, fees and other charges, on any loan, or forbearance of any money, goods or credits regardless of maturity and whether secured or unsecured, shall not be subject to any regulatory ceiling, except for finance charges imposed on credit card receivables” as per existing regulations.
As of end-June this year, based on BSP data, banks’ credit card receivables or loans total P410.399 billion, up 28.4 percent from same time in 2019 of P319.639 billion. The credit card receivables was higher in the May data which reached P418.885 billion.
Credit card borrowers received a reprieve in April to May from paying current loans after the Bayanihan Act mandated 30-day grace periods that were extended during the community quarantine restrictions, and some banks granted grace periods until end-June.
BSP Deputy Governor Chuchi G. Fonacier (Bloomberg file photo)
BSP Deputy Governor Chuchi G. Fonacier said the proposed limit on the interest rate that banks and credit card companies charge on credit card debt is a first and should help credit card borrowers affected by the COVID-19 lockdowns.
“This is the first time (that BSP is proposing this), as I recall. This will be a significant help for credit cardholders,” said Fonacier.
In separate statements on Tuesday, the Bankers Association of the Philippines (BAP) and the Management Association of the Philippines (MAP) said they favor and will get behind the BSP’s yet-to-be-approved circular on the setting of a limit to the interest rate on credit card cash advances and installment payments.
“We welcome this initiative of the BSP and hope that this collective effort of the banking industry will help ease the burden of our credit cardholders during these challenging times,” BAP president Cezar P. Consing, also the CEO and president of Bank of the Philippine Islands, said.
The BAP also said that with the Credit Card Association of the Philippines which issued its own statement this week, they are united in supporting the BSP move.
MAP President Francis Lim said the BSP proposal “coupled with the 60-day payment deferment under the Bayanihan to Recover as One Act, will provide big relief to businesses and individuals using credit cards, many of whom have found themselves jobless as a result of the pandemic.”
Lim is also encouraged that member banks of the BAP are supportive of the proposed cap on credit card finance charges. “That is a clear indication how the banking industry is bending over backwards to help our countrymen during this critical period,” he said.
Based on the draft circular posted on the BSP website and still culling comments from the banking community, the BSP is proposing for banks to impose a maximum finance charge of 24 percent annual interest rate for credit card cash advances and installment purchases.
This “maximum finance charge” will be reviewed every six months.
The BSP wants banks and credit card issuers to only charge interest or finance charges “arising from the non-payment in full or on time of the outstanding balance based on the unpaid amount of the outstanding balance as of statement cut-off date”.
As for rate ceilings, the circular said the “rate of interest, including commissions, premiums, fees and other charges, on any loan, or forbearance of any money, goods or credits regardless of maturity and whether secured or unsecured, shall not be subject to any regulatory ceiling, except for finance charges imposed on credit card receivables” as per existing regulations.
As of end-June this year, based on BSP data, banks’ credit card receivables or loans total P410.399 billion, up 28.4 percent from same time in 2019 of P319.639 billion. The credit card receivables was higher in the May data which reached P418.885 billion.
Credit card borrowers received a reprieve in April to May from paying current loans after the Bayanihan Act mandated 30-day grace periods that were extended during the community quarantine restrictions, and some banks granted grace periods until end-June.