New credit card regulations

THE LONG standing issue on which government office should supervise the credit card industry—the Department of Trade and Industry or Bangko Sentral ng Pilipinas (BSP)—has been resolved with the enactment of Republic Act No. 10870, or the Philippine Credit Card Industry Regulation Law.

The law gives BSP the responsibility of supervising all credit card issuers and acquirers (or entities that accept and facilitate the processing of the credit card transaction that is initially accepted by the merchant).

Pursuant to this authority, BSP shall issue rules of conduct and impose penalties in case of noncompliance. It also has the power to determine the reasonableness of the fees and charges imposed by the companies covered.

The law also prohibits the practice of some credit card companies of issuing “pre-approved” credit cards to people who did not apply for them or are not qualified to have them.

Credit card issuers are required to conduct, before issuing credit cards, know-your-client (KYC) procedures and exercise proper diligence in ascertaining applicants possess good credit standing and are capable of fulfilling their credit obligations.

Credit card issuers are also obliged to disclose to current and potential credit cardholders, in easy-to-understand language, information that will make them aware of their responsibilities. These include finance charges and penalty fees.

Thus, the cardholders are put on notice that there is no free lunch in their plastics and that failure to pay their bills on time could hurt their wallets.

The law has also given uniform treatment of the “payment due date” clause in billing statements.

The rule now is, if the payment due date for a credit card falls on weekends and regular national holidays, the card’s payment due date is automatically moved to the next business day.

Since the law uses the word “regular” in its description of holidays, those declared to commemorate local events or special occasions will not affect the due date indicated in the contract.

The lawmakers were aware though that not all credit cardholders can pay their bills in time or in full.

When this happens, the credit card issuer “may resort to all reasonable and legally permissible means to collect amounts due them under the credit card agreement. Provided that in the exercise of its rights and performance of its duties, they must observe good faith, reasonable conduct and proper decorum and refrain from engaging in unscrupulous acts.”

The reality on the ground though is, when an unpaid account is assigned for collection to a third party or collection lawyer, the rules of civility in pursuing that task are often thrown out of the window.

Sometimes, the collecting agents engage in unethical activities, such as, calling the cardholder late at night, talking to his co-employees about his debt, or sending anonymous derogatory letters to his friends.

These techniques are resorted to because the collecting agent wants to avoid the filing of a collection case against the cardholder, which would entail the payment of filing fees and other court charges without the assurance that he would be able, if at all, to collect anything from the cardholder.

On this point, the law states that “a credit card issuer or collection agent shall not harass, abuse or oppress any person or engage in any unfair practices, as may be defined by BSP rules and regulations, in connection with the collection of any credit card debt.”

Knowing the BSP’s track record in enforcing our banking rules, the credit card companies are in for tight supervision once the implementing regulations of this law are issued.

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