House leader backs bill on interest cap for credit card

MANILA – Deputy Speaker Bernadette Herrera is pushing for the immediate passage of a measure seeking to put an interest rate cap on credit card and consumer loans offered by banks and other financial institutions.

In a statement on Friday, Herrera said setting a cap on credit card and loan interest rates has become imperative with the coronavirus disease (Covid-19) pandemic forcing a lot of businesses to close down and pushing up the country’s unemployment rate.

“It is high time that we put an end to predatory and abusive lending practices, which have been among the greatest threats to Filipino families working to achieve financial security,” Herrera said.

House Bill (HB) 7967 proposes amendments to the Usury Law that will cap interest rates for credit cards and otherwise set a prescribed range of fixed rates for various forms of lending.

It sets the maximum interest rate for credit card charges and other cash advance arrangements at 12 percent annually, or any such rate prescribed by the Monetary Board of the Bangko Sentral ng Pilipinas, subject to some constraints.

The limitation on the Monetary Board-set rate on loan, forbearance agreements, and credit card charges is “not more than the three percentage points higher than the rate of 91-day treasury bills in the quarter preceding the monetary board’s imposition of the said maximum rate.”

Herrera said she would talk to Speaker Lord Allan Velasco and Majority Leader Ferdinand Martin Romualdez about the possibility of including HB 7967 in the list of priority measures under the 18th Congress.

“It is unfortunate that even during the pandemic, these banks and lending companies abuse the humble worker and entrepreneur, obligating them to pay high interest rates and penalties for late payments,” Herrera said.

Under the bill, those who will violate any of its provisions could face a fine of up to PHP5 million or imprisonment of not more than 12 years, or both.

On top of this, the violator shall return the entire sum received as interest from aggrieved party plus all costs and expenses incurred in the prosecution of the offense.