Banks and Credit Card Firms Urged to Scrap Fees

I hope this will become a reality and not just a wishful thinking. The reason why we are borrowing money is because we need to buy things we couldn’t buy in cash. But many credit card companies, instead of helping us, they double the burden. Imagine, with current interest rate of 3.5% a month and compounding every month, how will be able to pay it? If the amount of your loan or outstanding balance is only P3,000 then it might be negligible. But what if it balloons to P300,000 ? 3.5% interest rate of that amount is already P10,500. It’s already a one month salary of an ordinary factory worker or a utility staff. So does it make a difference with a loan sharks or usury? sharks have many sizes but they are all classified as sharks. Whether a great white shark, hammerhead shark or the smallest shark, the Dwarf Lanternfish is still a shark.

I want to share what I found in The Philippine Star, urging banks to scrap fees by Cebu Rep. Eduardo Gullas:

Cebu Rep Eduardo Gullas urged credit card issuers, including banks, to immediately do away with annual membership fee, and unnecessary charges ”Issuers no longer have any excuses to continue penalizing credit cardholders with oppressive extra fees and charges, now that we have a new law enabling them to ferret out bad creditors and effectively reducing transaction costs,” he said. Gullas was referring to the Credit Information System Law, or Republic Act 9510.

Signed by President Arroyo on Oct 30, the new law creates the Credit Information Corp (ClC), which would establish a credible and comprehensive credit information system. Gullas said this would ease credit processing in a big way and lessen transaction costs for credit card issuers and other lenders as well as their clients or customers.

With highly improved credit information management, the new system is also expected to minimize the risk of defaults, he said. He lamented that credit card issuers charge excessive interest rates that are nearly four times those being assessed by credit card firms in the United States.

They are also unfairly punishing consumers with needless annual membership fees and unreasonable extra charges on late payments, he said.
He pointed out that Issuers charge users interest of up to 42 percent a year or 3.5 percent a month, which is four times the average rate of 11 percent in the United States. ”Also, in the US and other countries, card issuers do not impose annual membership fees.

Here, issuers collect anywhere from P750 to P2,500 per principal cardholder, plus an extra P500 to P1,250 for every supplementary card- holder. This is outrageous,” Gullas stressed. He noted that more than five million Filipinos now routinely use credit cards, and the number is growing around 10 percent yearly.

In membership fees alone, issuers collected between P3.75 billon to P12.5 billion a year, he said. This is a lot of money that credit card holder can keep and spend, he said. Citing a report of the Bangko Sentral ng Pilipinas, Gullas said credit card firms reported a total of P106 billion in receivables as of last September, up 22.6 percent from a year ago. Credit cards now account for 5. 5 percent of the total loan portfolio of banks, he added.

I’m praying and hoping that this news will not be in the archive and collect cyber dust but be put into action.