Metro Manila (CNN Philippines, August 25) — Banks may soon have to reduce interest rates for loans charged to credit cards if a new policy from the Bangko Sentral ng Pilipinas pushes through.
A draft circular posted on the BSP website solicits comments on the plan to impose a 24 percent annual interest rate ceiling for cash advances or installment purchases lodged in credit cards.
Under existing rules, banks are authorized to collect so-called finance charges for the delayed or incomplete payments of outstanding card balances for every billing date.
Currently, banks either charge a monthly fixed rate or a one-time service fee on cash advances, usually whichever is higher. The new rules will translate to an effective 2 percent monthly charge if divided equally.
The maximum finance charge will be subject to review every six months, according to the draft order. However, the BSP said other charges, such as commissions, premiums and other loan fees will not be subject to a limit.
The draft circular is posted online to solicit comments from stakeholders until Wednesday, August 26. So far, business groups were receptive.
In a joint statement, the Bankers Association of the Philippines and the Credit Card Association of the Philippines said it was a welcome move to “help ease the burden” of borrowers amid the COVID-19 pandemic.
All loan payments have been given a grace period when the country went into strict lockdowns to curb COVID-19 infections. The Bayanihan to Recover as One Act will give a fresh 60-day reprieve to borrowers once signed into law.
Millions of Filipinos lost their jobs as strict quarantine rules limit movement and forced businesses to close shop.
The Management Association of the Philippines said separately that even businesses will benefit from the proposed rule, adding that banks are “bending over backwards” to extend help however they can.
