Bill seeks cap on credit card interest rates

MANILA, Philippines - A Senate Bill seeks to put a ceiling on the interest rates and surcharges being levied by credit card companies, as well as prohibiting the practice of including hidden charges in the billing process. Senate Bill 1438 puts a cap of 1 percent per month or 12 percent per annum on the interest rates that can be charged by credit card companies. It also seeks to put a ceiling of 1 percent on the surcharges and penalties imposed by these companies. Currently, the lowest interest rate among credit card companies is at 2.5 percent while the highest is at 3.5 percent. "The state has to come in to regulate the interest rates charged by these companies so that a healthier economic environment will prevail for the benefit of the consuming public and credit card companies," said Senator Francis G. Escudero, who chairs the Senate committee on banks, financial institutions and currencies. The senator is also looking into the reinstatement of the Anti-Usury Law, which was suspended by the Central Bank in 1982. As a result, it lifted restrictions, allowing parties to agree on interest rates. Despite the law’s suspension, it still didn’t give credit card companies the license to charge prohibitive interest rates. "We, at one time or another have heard a lot of horror stories involving credit cards, particularly the billing process and the abuses in the manner of collection. It is high time that we take a hard look at the issue and pass legislation that aims to protect the interest of the public," Escudero said He also cited the prevalence of five-six, a lending practice in many urban and rural poor communities which results in the debtor getting deeper into debt. "Banks, which are essentially established and formal institutions, are being watched. But not informal ones, such as 5-6, which has zero track record," Escudero said. - GMANews.TV