Bill regulating credit card industry endorsed for plenary approval

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MANILA — The House Committee on Banks and Financial Intermediaries has endorsed for plenary approval a proposal to regulate the country’s credit card industry to ensure conditions of fair and sound consumer credit practices, and to encourage competition and transparency that support a more efficient delivery of services.

The committee chaired by Rep. Nelson P. Collantes (3rd District, Batangas) approved House Bill 5417 or the proposed “Philippine Credit Card Industry Regulation Law,” which substituted eight bills.

Collantes, also author of one of the substituted bills, House Bill 4861, criticized as “prohibitive” the conditions and penalties imposed by banks and credit card companies on cardholders, especially for those who fail to settle their dues.

“Inspite of this situation, data on card holders imply that consumers still rely on plastic money in times of dire need and for emergency expenditures. Moreover, the various methods employed by credit card companies to market and promote credit cards at times inhibit the consumers to scrutinize the terms, conditions and sanctions that will be imposed for delayed payments,” said Collantes.

He said credit card users have increased tremendously since the 1990s, citing data alone from Metro Manila reveal that as of December 2010, at least 6.7 million credit cards have been issued to Filipino consumers.

This number represents a three percent yearly growth rate from 2007 to 2010 according to him. The data will still increase if the number of consumers amounting to roughly one million individuals with multiple credit cards will be included according to Collantes.

The bill provides it is the declared policy of the State to foster the development of the credit card industry as an indispensable tool in making consumer credit readily available to all Filipinos under conditions of fair and sound consumer credit practices, which are aligned with global practices, in promoting an efficient payments system and in encouraging competition and transparency that support a more efficient delivery of credit card services.

The bill also provides that to ensure the vibrancy and efficiency of the credit card industry, the State shall institute appropriate mechanism to protect and educate credit card holders.

The measure mandates the Bangko Sentral ng Pilipinas (BSP) to supervise all credit card issuers and acquirers through the following: issuance of rules of conduct or the establishment of standards of operation for uniform application to all institutions of functions covered, and the imposition of penalties in case of non-compliance therewith; conduct of examination as determined by the Monetary Board to determine compliance with laws and regulations; and overseeing to ascertain that laws and regulations are complied with. Moreover, the BSP may also limit and prohibit the charging of annual membership fees for credit cards, the bill provides.

In the exercise of its authority to limit and prohibit these fees, the Monetary Board shall be guided by the following: the purpose for the fees including the cost of production of the credit card; the service extended to card holders; the other charges and fees already imposed on credit cards; change in price level; and such other relevant criteria as the Monetary Board may adopt.

Another salient feature of the bill pertains to the appropriate manner of collection. The bill provides a credit card issuer may resort to all reasonable and legally permissible means to collect amounts due them under the credit card agreement. In the exercise of their rights and performance of duties, they must observe good faith, reasonable conduct and proper decorum and refrain from engaging in unscrupulous acts.

The bill also provides that a credit card issuer or collection agents shall not harass, abuse or oppress any person or engage in any unfair practices, as may defined by the BSP rules and regulations, in connection with the collection of any credit card debt.

The measure also requires know-your-client procedures in the exercise of proper diligence; provides for an efficient system for managing risk arising from credit card operations; provides the cardholder the authority to decline increase in their credit limit and the option to request for a credit limit adjustment subject to the approval of the credit card issuer; and provides for the circumstances under which disclosure of necessary information from the potential cardholders may be made.

Furthermore, the bill also requires the credit card issuer to be transparent in their computation of all charges and fees; prohibits imposition of over-the-limit fees without the expressed consent of the cardholder; provides for the confidentiality of cardholder information; and establishes a period within which complaints on billing may be made and the period upon which the card issuer must reply.

The provisions of Section 37 of Republic Act 7653, otherwise known as the “New Central Bank Act,” shall apply to erring credit card issuers, acquiring banks, their directors and officers, including, but not limited to, the administrative sanctions that may be imposed, without prejudice to the criminal sanctions against the culpable persons provided in Section 25 hereof, for any willful violation of this law or any regulated rules, regulations, orders or instructions issued by the Monetary Board.

In addition, the violator shall face imprisonment of two to 10 years, or pay a fine of P50,000 to P200,000, or both, at the discretion of the court.

House Bill 5417 is in substitution of the following: House Bill 4861 authored by Reps. Collantes and Agapito H. Guanlao; HB 207 by Rep. Salvacion S. Ponce Enrile; HB 1031 by Rep. Roman T. Romulo; HB 1513 by Reps. Marcelino R. Teodoro, Elisa T. Kho, Christopher S. Co and Rodel M. Batocabe; HB 2043 by Rep. Evelina G. Escudero; HB 2551 Rep. Raymond Democrito C. Mendoza; HB 3563 by Reps. Mariano U. Piamonte, Jr., Julieta R. Cortuna and Collantes; and HB 5201 by Reps. Mark A. Villar and Gavini C. Pancho.