BSP chides credit card issuers amid complaints

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has reminded credit card issuers to strictly comply with the mandated debt moratorium to ease the burden of Filipinos amid the pandemic.

BSP Deputy Governor Chuchi Fonacier issued Circular Letter 2021-008 calling for the strict compliance with prevailing regulations on credit cards and financial consumer protection, as well as the provisions of Republic Act 11469 or the Bayanihan to Heal as One (Bayanihan 1) and RA 11494 or the Bayanihan to Recover as One Act or (Bayanihan 2).

“This is in view of the high number of credit card-related complaints received,” Fonacier stated in the circular.

Bayanihan 1 granted a 30-day debt holiday which lapsed in early June last year, while Bayanihan 2 extended a one-time 60-day grace period for all existing, current and outstanding loans with principal and/or interest, including amortizations until December last year.

“The BSP reminds all BSP-supervised financial institutions operating as credit card issuers to strictly comply with the regulations governing credit card operations and consumer protection,” Fonacier said.

The Credit Card Association of the Philippines (CCAP) has reported that the industry’s delinquency rate increased to 11.5 percent as of end-September last year, more than two and a half times the delinquency rate in 2019.

The global health crisis has caused immense economic changes for Filipinos, affecting their livelihoods and finances in the process.

Credit card delinquency occurs when a cardholder has a poor payment history, and frequently pays bills after the due date. The credit lines of delinquent cardholders are also often fully utilized, which may be a reflection of a very tight cash flow.

A bad credit history can disqualify a potential borrower from a credit card or loan that he or she is applying for because past credit behavior is a reliable indicator of credit risk.

The BSP has imposed a 24 percent cap on the annual interest rates or two percent per month on all credit card transactions effective on Nov. 3, 2020. Prior to the imposition of the ceiling, issuers were charging between 18 and 58 percent per annum.