Bad debts of credit card issuers ease in July

MANILA, Philippines — The soured loans of credit card issuers improved to 5.7 percent in end-July after peaking at 10.1 percent during the height of the COVID lockdowns in November 2020, according to the Bangko Sentral ng Pilipinas.

BSP Governor Felipe Medalla said during the virtual celebration of the 42nd anniversary of the Credit Card Association of the Philippines (CCAP) that the non-performing loan (NPL) ratio of credit card issuers continued to ease despite the strong growth in receivables.

Medalla said the industry reported a double-digit growth in credit card receivables this year, hitting 20.4 percent in July.

“Despite the challenging operating environment, the credit card industry managed to grow its portfolio in a prudent manner,” the BSP chief said.

According to Medalla, the latest NPL ratio is now close to pre-pandemic levels.

“The efforts of the industry to manage the quality of credit card receivables has borne fruit,” Medalla said.

Medalla said the BSP remains committed to providing an enabling regulatory environment to ensure the continued resiliency and stability of the Philippine financial system.

“Together, let us continue to do our part in promoting responsible credit and ensuring a safe and reliable credit card industry toward a more stable and resilient Philippine economy,” the BSP chief said.

BSP Deputy Governor Chuchi Fonacier said the credit card industry has also been at the forefront of extending the central bank’s temporary relief measures to individuals or businesses affected by the COVID crisis.

“Apart from keeping finance charges within the BSP’s ceilings on credit card transactions, the industry led the way in restructuring credit card receivables,” Fonacier said.

As of end-July, Fonacier said the majority of restructured consumer loans were credit card receivables amounting to P6 billion and accounting for a 56.3 percent share.

“We likewise appreciate the active engagement of CCAP in the BSP’s initiatives, particularly in the regular review of the credit card ceilings. The inputs and feedback of the credit card industry form part of the BSP’s holistic assessment of the appropriateness of the credit card ceilings,” Fonacier said.

The BSP recently imposed a cap on the interest rate on all credit card transactions.

The interest rates or finance charges on the unpaid outstanding credit card balance of a cardholder were capped at two percent per month or 24 percent per year. A separate interest rate ceiling of one percent was also prescribed for credit card installment loans.

No other charge or fee can be imposed or collected on credit card cash advances except for a maximum processing fee of P200 per transaction.

Fonacier said the central bank recognizes the valuable work and contributions of CCAP in leading the credit card industry through the years.

“Credit card financing has been slowly gaining momentum in line with resumption of economic activities. Resilience of the industry can be seen in the double-digit growth of credit card billings and receivables alongside improvement in the quality of the credit card portfolio,” Fonacier said.

CCAP president Margarita Surtida said the organization would continue to evolve by collaborating with more government agencies to promote consumer rights and protection.

Surtida, head of cards and acquiring business group at Asia United Bank (AUB), said CCAP plans to expand its reach to other payment landscapes to add value to stakeholders.