MANILA, Philippines – Banks have pledged to meet the 24 percent cap on credit card charges to be imposed by Bangko Sentral ng Pilipinas (BSP) starting November 3 to help consumers and small businesses in the middle of the COVID-19 pandemic.
Benjamin Castillo, managing director of the Bankers Association of the Philippines (BAP), said member banks recognize the importance of credit card policy reform during this critically difficult period.
“We support this initiative. This will help ease the burden on all households, including businesses severely affected by the pandemic, ”Castillo said.
The latest data from the BSP showed that the average annualized interest rate on credit card receivables ranges from 18 percent to 58 percent in the first half of the year.
Credit card loans increased 28.4 percent to P410.4 billion in the first half from P319.640 million in the same period last year.
BSP Governor Benjamin Diokno announced last Thursday that the Central Bank’s Monetary Board approved the imposition of the ceiling on credit card charges to soften the blow of the global health crisis.
“The interest rate cap on credit card accounts receivable aims to ease the financial burden on consumers and micro, small and medium-sized businesses amid a difficult economic environment caused by the COVID-19 pandemic. Diokno said.
The BSP chief said the policy also states that interest rates or finance charges on the outstanding balance of a cardholder’s credit card should not exceed two percent per month.
The new issuance prescribes a separate interest rate cap for credit card installment loans. For these transactions, credit card issuers can only charge additional monthly fees up to a maximum of one percent.
Similarly, no other fees or charges may be imposed or charged on credit card cash advances, except for a maximum processing fee of P200 per transaction.
Rates and maximum rates are subject to review by the BSP every six months.
Castillo said the BAP appreciates the continued collaboration between the industry and the regulator to combat the harmful effects of the COVID-19 health crisis.
According to the BAP, the BSP has been decisive and aggressive in its response to ensure a strong and healthy banking industry through reductions in policy rates and reserve requirements.