Bankers back 24% in­ter­est rate ceil­ing for credit cards

The Freeman - - Business -

The Bankers As­so­ci­a­tion of the Philip­pines (BAP) wel­comed the Bangko Sen­tral ng Pilip­inas’ (BSP) move to set a cap on the an­nual in­ter­est rate of all credit card trans­ac­tions as the lat­est pol­icy is seen to ease the bur­den on both house­holds and busi­nesses amid the COVID-19 cri­sis.

On Thurs­day, the BSP’s pol­icy-set­ting Mon­e­tary Board set the limit on the an­nual in­ter­est rate on all credit card trans­ac­tions at 24% ef­fec­tive Novem­ber 3, 2020.

In a state­ment, BAP man­ag­ing direc­tor Benjamin Castillo said it rec­og­nizes the im­por­tance of the credit card pol­icy re­form dur­ing this crit­i­cally dif­fi­cult pe­riod.

“We sup­port this ini­tia­tive by the Bangko Sen­tral ng Pilip­inas. This will help ease the bur­den of ev­ery house­hold in­clud­ing busi­nesses se­verely af­fected by the pan­demic,” Castillo said.

The bankers group ap­pre­ci­ates the con­tin­u­ing col­lab­o­ra­tion be­tween the in­dus­try and the reg­u­la­tor as we con­tinue to fight the ill-ef­fects of the COVID-19 health cri­sis, he said.

“The BSP has been de­ci­sive and ag­gres­sive in their re­sponse to en­sure a healthy and strong bank­ing in­dus­try through its pol­icy rate and re­serve re­quire­ment re­duc­tions,” he added.

In a vir­tual brief­ing, BSP Gov­er­nor Benjamin Dio­kno said the lat­est pol­icy also pro­vides that in­ter­est rates or fi­nance charges on the un­paid out­stand­ing credit card bal­ance should not ex­ceed 2% per month.

“The in­ter­est rate cap on credit card re­ceiv­ables aims to ease the fi­nan­cial bur­den of con­sumers and mi­cro, small, and medium en­ter­prises amid a dif­fi­cult eco­nomic en­vi­ron­ment caused by the COVID-19 pan­demic,” Dio­kno said.

Un­der the pol­icy, credit card is­suers may only charge monthly add-on rates of a max­i­mum of 1% for credit card in­stall­ment loans.

No other charges or fees may be im­posed or col­lected on credit card cash ad­vances, ex­cept for a max­i­mum pro­cess­ing fee of P200 per trans­ac­tion.

The rates will be sub­ject to re­view by the BSP ev­ery six months, pur­suant to the cen­tral bank’s su­per­vi­sory author­ity over all credit card is­suers un­der the Credit Card In­dus­try Reg­u­la­tion Law.

The new reg­u­la­tion also waives the re­quire­ment for credit card is­suers to no­tify the card­hold­ers of the said charges on in­ter­est or fi­nance charges at least 90 calendar days be­fore the changes take ef­fect.

The set­ting of a max­i­mum ceil­ing on in­ter­est or fi­nance charges on credit card trans­ac­tions is also in keep­ing with the coun­try’s cur­rent low in­ter­est rate en­vi­ron­ment, Dio­kno said.

At present, the in­ter­est rate on the overnight re­verse re­pur­chase (RRP) fa­cil­ity re­mains at 2.25%.

The Mon­e­tary Board of the BSP is sched­uled to meet again on next Thurs­day, Oc­to­ber 1, to dis­cuss whether or not a change in pol­icy rates is war­ranted.

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