The Monetary Board (MB) approved the regulations that implement the Philippine Credit Card Industry Regulation Law (Republic Act No. 10870.) The law and its Implementing Rules and Regulations (IRR) aim to make consumer credit readily available under conditions of safe, sound, efficient, and fair business conduct aligned with global best practices.
The IRR provides the framework for the entry of new players in the credit card business beyond just the banks, their affiliates and subsidiaries. Opening up the market to a wide range of players can lead to more transparent and competitive interest rates, innovative products and improved services. All credit card issuers are subject to standards of good governance, adequate risk management, and strong consumer protection mechanisms.
The IRR addresses the key customer concerns regarding credit cards, particularly on the transparency and manner of computing charges and fees, safeguards against unfair collection practices, immediate posting of payments, confidentiality of consumer data, and expeditious resolution of complaints and disputed transactions, among others.
The rules require all credit card issuers to fully disclose, in an understandable way, the manner of computing finance charges and other fees related to credit card use as well as provide ample notification prior to effecting any changes in the said charges. These disclosures shall be in application forms, the terms and conditions of credit card contracts, and billing statements. The rules likewise clarify that the finance charges shall be computed based on the unpaid amount of the outstanding balance as of statement cut-off date and shall not include current and deferred charges.
Prohibitions against unfair collection practices have also been strengthened where collection agents must observe good faith, fair and reasonable conduct, and proper decorum when dealing with all consumers, including cardholders already in default.
Payments using cash, check or debit cards, made through any accredited payment center shall be posted on the same day by credit card issuers. Due dates falling on weekends or holidays shall be automatically moved to the next business day.
The IRR further protects cardholders’ right to data privacy and redress. Customer information can only be shared to third parties upon a cardholder’s informed consent, and under specific conditions defined by the law. All issuers must also have consumer assistance units to expeditiously address cardholders’ concerns, such as billing errors, unauthorized transactions and other credit card related issues, within 90 days from receipt of the concerns.
It is important that credit card issuers ensure appropriate customer identification and sound credit underwriting to promote the soundness and integrity of the industry as well as promote responsible use of credit and prevent over-indebtedness. Cardholders on the other hand have the serious responsibility to manage their credit, protect and safeguard the integrity of their transactions, and immediately report lost cards or observed billing discrepancies.
The IRR contemplates a phased implementation of some provisions to account for the necessary adjustments in the systems and processes of existing credit card issuers.
At present, there are more than eight (8) million credit cards issued in the country. There is further potential for expansion in light of the current economic growth, the country’s demographics and the increasingly digital payment system. The recently approved rules aim to ensure that such growth in the credit card industry will be safe and sound, and one that protects consumers.
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