Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said Thursday that the BSP could extend the imposition of a two percent ceiling on credit card interest rates for longer than six months to help Filipinos better manage their credit card debts.
“That can be extended beyond the original six months,” he said after his weekly “GBED Talks” online press briefing. This implies that credit card users will continue to have lower billing statements for the rest of 2021. The BSP will be reviewing credit card rates and fees in May this year.
To help financial consumers cope with financial constraints due to the pandemic and to avail of more affordable pricing terms, the BSP last September 24, 2020 approved a cap on credit card rates and fees beginning on November 3, 2020, of an annual interest rate ceiling of 24 percent on all credit card transactions which means that interest rates or finance charges on the unpaid outstanding credit card balance of a cardholder will only be two percent per month. The monthly add-on rate for credit card installment loans should also not exceed one percent per month and the processing fee on the availment of credit card cash advances should likewise not exceed P200 per transaction.
The BSP reiterated Thursday that the power to set limits on credit card interest rates and fees is based on the BSP’s authority under the Philippine Credit Card Industry Regulation Law.
“The BSP's supervisory authority under the said law includes the determination of the reasonableness of fees and charges for credit card transactions and the issuance of regulations on the same,” explained the BSP. “Thus, the BSP has flexibility in the setting of the credit card interest, finance charge and fees in line with this legal authority.”
In the meantime, Diokno said they are closely working with banks for a “collective vigilance” to combat against credit card fraud and scams which have alarmingly increased during the lockdown.
“Let me underscore that collective vigilance against frauds is necessary amid the rise in the usage of digital financial products and services during the pandemic.
Collective vigilance is seen to foster greater confidence in the financial system under the New Economy,” said Diokno.
Based on the BSP’s consumer assistance mechanism (CAM) and its chatbot BOB or BSP Online Buddy, some 23,000 complaints have been registered in the fourth quarter of 2020. About 20 percent or 4,600 were credit card complaints, and 12 percent of the total complaints volume are on the implementation of the 60-day mandatory grace period for loan and credit card products under the two Bayanihan laws.
All of these complaints were referred to the senior management of the concerned banks for appropriate action, said Diokno. “Most of these complaints are resolved either by repayments scheme or loan restructuring,” he added.
Diokno said the BSP has noted a spike in financial crimes during the pandemic but this is not only about credit card concerns. “The top concern in credit cards in 2019 was disputed transaction while credit card fees and charges was the primary issue in 2020,” he said.
The most common type of fraudulent schemes involving credit cards are the following: disputed transactions due to disclosure of personal information; phishing emails; and breach of personal account information through OTP via phone to a person representing as bank employee.
“Based on BSP’s analysis, fraudulent credit card transactions commonly involve information and identity theft; phishing and its variations; and card skimming and card replacement schemes. Note that unwittingly divulging personal and account information may lead to unauthorized credit card usage,” said Diokno.
The BSP has issued plenty of guidelines and regulations mandating all BSP supervised financial institutions to have “stringent information technology security controls and sound risk management practices, and to adopt industry-standard technology like the multi-factor authentication system for online transactions.”
Banks’ reporting requirements on cyber-related incidents and operational disruptions have also been tightened to ensure the protection of consumers should an actual attack take place, said Diokno.
“The BSP stands ready to deploy its full range of supervisory tools to foster market discipline and to protect the rights and interests of consumers in an expanding digital landscape,” he said.
The BSP’s information campaign against credit card fraud, its Digital Literacy Program, and promotion of e-safety ensures consumer protection is in place.
“The BSP believes that e-safety is a collective responsibility,” said Diokno.
Last January 14, the Monetary Board approved a circular letter – one of many on credit card concerns -- reminding banks and credit card issuers to strictly follow rules to protect credit card users, specifically with the prevailing regulations on credit cards and financial consumer protection as well as the implementing rules and regulations of Section 4 (aa) of Republic Act No. 11649 or The Bayanihan to Heal as One Act, and Section 4 (uu) of RA No. 11494 or The Bayanihan to Recover as One Act.
The circular letter was released “in view of the high number of credit card-related complaints received,” according to BSP Deputy Governor Chuchi G. Fonacier, who signed the memo.
As of end-November 2020, the BSP reported some P415.50 billion credit card loans or receivables, up from same time in 2019 of P352.36 billion.