Major banks supported order of the Bangko Sentral ng Pilipinas to put a 24-percent cap on annual interest rate of credit card transactions beginning Nov. 3, saying it will lessen the burden experienced by individuals and businesses during the pandemic.
Bankers Association of the Philippines managing director Benjamin Castillo said in an e-mailed statement Friday the group recognized the importance of the credit card policy reform during the critically difficult period.
“The BAP appreciates the continuing collaboration between the industry and the regulator as we continue to fight the ill-effects of the COVID-19 health crisis,” Castillo said.
“We support this initiative by the Bangko Sentral ng Pilipinas. This will help ease the burden of every household including businesses severely affected by the pandemic,” Castillo said.
BSP Governor Benjamin Diokno said in an online briefing Thursday that the interest rates or finance charges on unpaid outstanding credit card balance of a cardholder should not exceed 2 percent per month.
He said the interest rate cap on credit card receivables would ease the financial burden on consumers and micro, small and medium enterprises amid a difficult economic environment caused by the COVID-19 pandemic.
The issuance prescribes a separate interest rate ceiling for credit card installment loans. For these transactions, credit card issuers may only charge monthly add-on rates up to a maximum of one percent.
No other charge or fee may be imposed or collected on credit card cash advances except for a maximum processing fee of P200 per transaction. These maximum rates and fees will also take effect on Nov. 3, subject to review by the BSP every six months.
Diokno said the reform initiative was pursuant to the BSP’s supervisory authority over all credit card issuers under the Credit Card Industry Regulation Law. It is also seen to promote responsible credit card lending in the country.
He said the setting of a maximum ceiling on interest or finance charges on credit card transactions was in line with the low-interest rate environment.
The interest rate on BSP’s overnight borrowing remains at a record low of 2.25 percent.