Republic ofthe Bhitippines
Hause of Representatives
Quezon City, Meteo Mail

Fifteenth Congress
First Regular Session

HOUSE BILL No.__ 3824

Introduced by Honorable Erico B. Aumentado

EXPLANATORY NOTE

This bill seeks to provide a ceiling on the interest rates, penalties,
surcharges and other finance fees charged by banks and credit card
companies on credit card transactions and to provide penalties for violation
thereof.

Credit card usage has grown enormously in the Philippines, The
intensive marketing strategies of credit card companies and the convenience
brought about by having a credit card have lured many Filipinos to use credit
cards in the purchase of goods and services.

However, with the suspension of Act No. 2655, otherwise known as
the “Usury Law,” and in the absence of a ceiling on the rate of interests,
penalties, surcharges and other finance charges, credit card companies are
free to impose high interest rates that would cause the amount of debt to
balloon to an outrageous amount more than three times the principal debt.
On average, credit card companies in the Philippine charge 3.75 % interest
rate per month which is currently among the highest in the world.

To safeguard the public from these abuses and impositions, it is
imperative to set a ceiling on the interest rates, penalties, surcharges and
other finance charges by banks and credit card companies on credit card
transactions.


In the recent case of Macalinao vs. Bank of Philippine Islands (G.R.
No. 175490, September 17, 2009), the Supreme Court held that interest
rates of 3% per month and higher are iniquitous, unconscionable and
exorbitant and therefore void. It ruled that an interest rate of one percent
(1%) per month and a penalty charge of one percent (1%) per month is more
appropriate and equitable.

To be more responsive to the plight of the poor borrowers, the rate of
interest, penalties, surcharges and other finance charges on credit card
transactions should be regulated. A rate of interest and penalty that is fair
and equitable to both the lender and the borrower should therefore be
imposed.

In view of the foregoing, approval of this bill is urgently
recommended.

—)

C 4G -
ERICO ENTADO

a


Rapuilecl the Hla
House of Representatives
Quezon City, Metro Manila

Fifteenth Congress
First Regular Session

HOUSE BILLNO._"_ 3824

Introduced by Honorable Erico B. Aumentado

AN ACT
PROVIDING A CEILING ON INTEREST RATES, PENALTIES AND
OTHER FEES CHARGED BY BANKS AND CREDIT CARD
COMPANIES FOR CREDIT CARD TRANSACTIONS AND
PRESCRIBING PENALTIES FOR VIOLATION THEREOF

Be it enacted by the Senate and House of Representatives of the Philippines
in Congress assembled:

SECTION 1. Short Title. — This Act shall be known as the

“Credit Card Fees Regulation Act.”

SEC.2. Declaration of Policy. — It is hereby declared the policy
of the State to protect and regulate the economic interest of the people and
ensure that only reasonable interest rates, fees, penalties and charges will be

imposed on credit card transactions.


SEC..3. Ceiling on Interest Rates, Penalties and other Finance
Charges on Credit Card. — \t shall be unlawful for any bank or credit card
company to charge an interest rate or impose penalties, surcharges and
similar finance charges by more than one percent (1%) per month or twelve

percent (12%) per annum on credit card transactions and purchases.

No other costs or finance charges shall be imposed upon a credit card

holder except for reasonable attorneys’ fees and costs of collection.

SEC. 4. Penalties. — Any violation of this Act shall be punishable
by a penalty of imprisonment of not less than six (6) months but not more
than one (1) year or a fine of not less than Twenty Thousand Pesos
(P20,000.00) but not more than One Hundred Thousand Pesos
(P100,000.00) or both such imprisonment or fine at the discretion of the

court.

In case of a partnership, association, corporation or any juridical
person, the penalty shall be imposed on the president, treasurer of any other
officer of person responsible for the violation. In addition, the license to
operate the business establishment shall be suspended for six (6) months or

in the case of recidivism, cancelled, as the case may be.


If the offender is an alien, he shall, after service of sentence, be
deported immediately without further proceedings in the Bureau of

Immigration.

SEC. 5. Repealing Clause. — All laws, decrees, executive orders,
proclamations, rules and regulations, and issuances, or parts thereof, which
are inconsistent with the provisions of this Act are hereby repealed or

amended accordingly.

SEC. 6. Effectivity. — This Act shall take effect fifteen (15) days
after its publication in the Official Gazette or in two (2) national newspapers

of general circulation.

Approved,