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Monday, July 11, 2005
Gullas seeks stiffer laws to protect credit card holders
CEBU Rep. Eduardo Gullas is pushing for new consumer legislation that would govern credit card issuers and protect card-holders from unfair lending practices.
“We need stiffer legislation that will protect cardholders from unwarranted fees and excessive penalty interest rates,” Gullas said in a press statement.
Gullas said card lenders should be prohibited from charging “exorbitant punitive interest rates” on customers who might miss or dispute a billing.
“Card lenders should also be restricted from switching interest rates on purchases retroactively and must provide more disclosure when rates are to be raised,” he said.
Gullas said issuers should likewise be required to disclose in billing statements how long it would take a customer to pay off debt by making only the minimum payments.
A stronger regulation of card issuers would put hundreds of millions of pesos back into the pockets of Filipino families struggling to make ends meet, help households emerge from debt and promote responsible card use, Gullas said.
“In the process, we will also be averting a consumer debt crisis similar to the one that ruined large financial institutions in South Korea,” he said.
Local card issuers charge interest rates of 3.25 to 3.5 percent per month, or 39 to 42 percent per annum, excluding late payment charges.
On top of higher interest rates, card lenders usually impose a monthly surcharge of P300 or more on customers who miss minimum payments.
In addition, issuers collect an annual membership fee of P500 to P1,000 per card.
“In the United States, there is no such thing as an annual (card) member fee,” Gullas said.
“With four million cards, issuers are amassing easily a windfall of P2 billion to P4 billion each year from member fees alone, at a rate of P500 to P1,000 per card. Yet, these fees are absolutely unnecessary,” Gullas said. “We definitely need stronger legislation so that card issuers will be more consumer-friendly in regards to fees and disclosure.”
More than four million cards have been issued to over two million Filipinos, according to the Credit Card Association of the Philippines.
As of end 2004, Filipinos had an aggregate outstanding balance of nearly P60 billion on their credit cards. (PR) |
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