House mulls cap on interest rates, other credit card charges

MANILA, Philippines – The House of Representatives plans to limit the interest rates and other charges that credit card companies are collecting from their customers.

The committee on banks and financial institutions is set to endorse a bill regulating the “sky-high” interest rates credit card companies charge.

Bill 2787, authored by Sorsogon Rep. Salvador Escudero lll, seeks to prohibit hidden penalties and costs that these companies, banks and similar institutions collect.

In filing the bill, Escudero cited studies showing that these business entities have made huge profits from unconscionable interest rates and surcharges they imposed on customers, many of whom are deep in debt or have gone bankrupt.

“Studies show that more and more credit card holders were unable to manage their finances that lead to credit card debt,” he said.

He noted “shocking experiences” of first time credit card users after receiving their bills due to the avalanche of high interest and other charges.

“The Usury Law may have been repealed, but it is not a license for persons to charge prohibitive rates,” he said.

He proposed to limit surcharges and penalties to a maximum of one percent a month.

At present, credit card companies charge an average of three percent interest on unpaid bills. They also impose varying amounts of finance charge and late payment fee.

A credit card user’s bill usually increases tremendously if he does not settle it in full come payment time, and if he makes cash advances.

Escudero recognized the usefulness of credit cards, which bring security and convenience to users by freeing them from the need to carry cash.