Love is made of Plastic: New Credit Card Regulations that You Should Know

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They come in almost all colors: red, orange, gold (yellow), green, blue, indigo, and black. Some are in precious metals like titanium or platinum, or in rare gems like diamond, or sapphire. These little pieces of plastic can be your best friend in times of need, or your worst nightmare, in times of want.

Whether they come as American Express, VISA International, Mastercard International, JCB International, Diners Club, China Union Pay, or your local Philippine bank of choice, these small pieces of plastic have been the subject of a continuing love-hate relationship, spurning the way to a growing number of laws and regulations for the protection of the consumers that use them, and of the banks that issue them.

Yes, your credit cards have been the subject of a growing number of regulations, the most recent of which is Republic Act No. 10870 otherwise known as the “Philippine Credit Card Industry Regulation Law”. There are quite a number of notable points that Philippine lawmakers have enacted into this law, which regulates the Philippine Credit Card Industry.

While implicit in the fact since banks (under the control of the BSP) issue credit cards, the Bangko Sentral ng Pilipinas (BSP) has been the high regulatory agency that supervises the credit card industry in the Philippines. Through Republic Act No. 10870, the spotlight has been clearly given to the BSP to police this high, mighty, and well-loved (or hated) industry.

Passed in late August 2016, credit card companies are now expected to strictly abide by the its provisions, most especially when the BSP releases a new set of implementing regulations.

Credit card companies are now mandated by law to disclose specific information under this new law. Previously, it was Republic Act No. 3765 or the Truth in Lending Act, that regulated the disclosures in these transactions, and specified the information that banks needed to disclose to its customers.

Under Republic Act No. 10870, banks are now required to disclose finance charges of unpaid amounts after due date, percentage interest in simple or annual rate, default, late payment/penalty fees and other delinquency related charges, the method of determining the balance upon which these interests and penalties will be applied, and other fees such as membership or renewal fees, processing charges, over-limit fees, collection fees, credit investigation fees and attorney’s fees.

For dual currency credit card accounts, the manner of conversion to Philippine Peso must be specified. Also, like a cigarette warning, banks must now include the notice: “Important Reminder: Paying less than the total amount due will increase the amount of interest you pay and the time it takes to repay your balance.” Sample computations must also be included in the credit card bill.

The new law also expressly mandates that in case a credit card is lost or stolen, any transaction made prior to reporting to the credit card issuer shall be for the account of the cardholder.

Previously, there was no regulation as to the period when a credit card bill may be disputed by the cardholder. Republic Act No. 10870 now gives cardholders up to thirty (30) calendar days from statement date to report any error or discrepancy in their billing statement, and further requires the credit card issuer shall take action within ten (10) business days from receipt of such notice.

Under-the-belt collection practices, which have been frowned upon in the past, are now outlawed in this new Philippine law. While banks may still obtain the services of collection agencies, these agencies are required to observe good faith, reasonable conduct and proper decorum and refrain from engaging in unscrupulous acts. While implicit in previous regulations, a credit card issuer or collection agent now cannot, by mandate of Republic Act No. 10870, harass, abuse or oppress any person or engage in any unfair practices, in connection with the collection of any credit card debt.

Also, before handing over the account to a collection agency, a bank is required to first inform its cardholder in writing of the endorsement of the collection of the account to a collection agency, or the endorsement of the account from one collection agency to another, prior to the actual endorsement. The notification shall include the full name of the collection agency and its contact details. Moreover, the credit card issuer must use the services of one collection agency for an account at a time.

Republic Act No. 10870 has made great headway in certain points, such as the rule that if a credit card due date falls on weekends and regular national holidays, the card payment due date is automatically moved to the next business day.

Also, when applying payment made by a cardholder, the payment shall first be made to the minimum payment in the credit card bill, and any excess will then be applied, first to the fees and charges, and then to the billed balance bearing the highest rate of interest, followed by the billed balance bearing the next higher rate of interest, until the payment is exhausted.

Credit card issuers and banks that will violate the law will be slapped with criminal administrative sanctions, under Republic Act No. 7653, otherwise known as “The New Central Bank Act”. In addition, Republic Act No. 10870 imposes a penalty of imprisonment of not less than two (2) years nor more than ten (10) years, or by a fine of not less than fifty thousand pesos (P50,000.00) but not more than two hundred thousand pesos (P200,000.00), or both, at the discretion of the court, to willful violators.

Nicolas & De Vega Law Offices is a full service law firm in the Philippines. You may visit us at the 16th Flr., Suite 1607 AIC Burgundy Empire Tower, ADB Ave., Ortigas Center, 1605 Pasig City, Metro Manila, Philippines. You may also call us at +632 4706126, +632 4706130, +632 4016392.