MANILA, Philippines—The new cap on credit card interest rates, finance charges and other fees—meant to help ease the burden on consumers and small businesses amid the COVID-19 pandemic—took effect on Nov. 3, the central bank reminded financial institutions and the public.
In a statement, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said that “starting on this date, interest or finance charges on unpaid outstanding credit card balance should not exceed 24 percent annually or two percent per month.”
The central bank chief added that, under the rules approved by the Monetary Board, the monthly add-on rate for credit card installment loans should not exceed 1 percent per month, and the processing fee on credit card cash advances should not exceed P200 per transaction.
The policy initiative — made possible by BSP’s supervisory authority over credit card issuers under the Credit Card Industry Regulation law — is seen to foster responsible credit card lending in the country.
Rates and fees provided by the circular are subject to review by the BSP every six months. Adjustments or changes, if any, on the ceilings will be carried out based on the those reviews.
The central bank urged the public to review the frequently asked questions on its website which provides more details on the policy approved by the regulator last September.
According to central bank officials, a recent study showed that Filipino credit card users pay anywhere from a low of 18 percent to a high of 54 percent in finance charges for transactions made on short-term loan facilities.
“Amid the rising use of electronic platforms for payments, the issuance will enable credit card holders to settle financial transactions under more affordable pricing terms,” Diokno said at an earlier briefing on the new policy.
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.
The interest rate on the BSP’s overnight reverse repurchase facility — the basis for banks’ own loan price — remains at 2.25 percent. This has been the lowest policy rate since the beginning of the pandemic.
The new regulation also waives the requirement for credit card issuers to notify the cardholder of the said changes on interest or finance charges at least 90 calendar days before such changes take effect.