Republic of the Philippines
House of Representatives
Quezon City

SIXTEENTH CONGRESS
Sesond Regular Session

House Bill No. ABE 1

Introduced by Hon. Nelson R. Collantes and
Hon. Agapito H. Guantao

EXPLANATORY NOTE

Credit card users have increased tremendously since the 1990s. In fact,
data from the Market Manila reveal that as of December 2010, at least
6.7 million credit cards have been issued to Filipino consumers. This
number represents an estimated 3% yearly growth rate from the 2007-
2010. In the same source, it is said that this data will still increase if
the number of consumers amounting to roughly 1 million individuals with
multiple cards will be included.

The conditions and penalties imposed by banks and credit card
companies on card holders tend to be very prohibitive, especially for
those who fail to settle their dues. In spite of this situation, the
above-mentioned data imply that consumers still rely on plastic money
in times of dire need and for emergency expenditures.

Likewise, it is also observed that almost all banks and other financial
institutions already promote and offer credit cards. And as such, these
credit cards companies compete with each other to promote and
encourage individuals to apply for credit cards. As a result, the various
methods employed by credit card companies to market and promote
credit cards at times inhibit the consumers to scrutinize the terms,
conditions and sanctions that will be imposed for delayed payments.

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And for the credit card issuers, this situation limits their time to actually
determine the paying capacity and credit standing of the applicants.

This bill seeks to set order and regulations in the credit card industry. It
intends to create an environment that is beneficial to both parties ----
the credit card companies and the consumers.

The bill seeks among others to make credit available and accessible
through the exercise of utmost diligence in credit investigation and the
exercise of “openness” in dealing with requests of consumers for
adjustments in credit limits.

In view of the foregoing, the enactment of this legislative measure is
earnestly sought.

M4. ? Clit.

HON. NELSON e. COLLANTES: HON. ITO H. JUANLAO.


House of Representatives
Quezon City
Second Regular Session

SIXTEENTH CONGRESS
SeeondRegular Session

House Bill No.4861.

Introduced by Hon. Nelson R. Collantes and
Hon. Agapito H. Guanlao

AN ACT
TO REGULATE THE PHILIPPINE CREDIT CARD INDNUSTRY

Article 1. Short Title - This Act shall be known as the “Philippine Credit
Card Industry Regulation Law”

Article 2. Declaration of Basic Policy - It is the policy of the State to
foster the development of the credit card industry as an indispensable
tool to promote an efficient payments system; to make consumer credit
readily available to all Filipinos under conditions of fair and sound
consumer credit practices which are aligned with global best practices;
to encourage competition and transparency that support a more
efficient delivery of services; and to ensure that appropriate
mechanisms are in place to protect and educate credit card holders.

Article 3. Scope and Coverage - This law shall govern all credit card
issuers, acquirers and all credit card transactions.

Article 4. Supervision - The Bangko Sentral ng Pilipinas (BSP) shall
supervise all credit card issuers and acquirers.

Supervision shall include the following;


Article 5. Defit

a.

a. The issuance of rules of conduct or the establishment of
standards of operation for uniform application to all
institutions or functions covered, and the imposition of
penalties in case of non-compliance therewith;

b. The conduct of examination as determined by the
Monetary Board to determine compliance with laws
regulations; and

c. Overseeing to ascertain that laws and regulations are
complied with.

ion of Terms -

Accelaration clause - any provision in the contract between the
credit card issuer and the cardholder that gives the credit card
issuer the right to demand the full settlement of the obligation in
case of default or non-payment of any amount due or for any valid
reason

. Annual membership fee - amount a credit card issuer levies for

the right to use its card and acquire access to other membership
benefits.

. Acquirer - shall refer to the institution that accepts and

facilitates the processing of the credit card transaction which is
initialy accepted by the merchant;

|. Balance transfer - transfer of the balance in a credit card

account to another credit card account.

. Billing cycle/billing period - period of time between billings

Billing cycles shall be at least fifteen (15) days.

Card Association - shall mean companies that provide credit
network such as American Express, VISA International, MasterCard
International, JCB International, Diners Club, China Union Pay or
any other card association.

. Cash advance - any cash obtained from the credit card account

on any manner availed by the cardholder.


9.

. Credit Card - any card or other credit device intended for the

purpose of obtaining money, property, or services on credit.
Credit card issuer - is a bank or a corporation that offers the use
of its credit card.

. Credit card limit - the maximum total amount for purchases, cash

advances, balance transfer, and finance charges, service fees,
penalties and other charges which can be charged to the credit
card.

. Default or delinquency - non-payment of, or payment of an

amount less than, the Minimum Amount Due, Minimum Payment
Required, or words of similar import for at least two (2) billing
cycles;

Finance charges - shall refer to the interest charged to the
cardholder on all credit card transactions in accordance with the
terms and conditions specified in the agreement on the use of the
credit card.

. Installment purchases - transactions wherein payment for is

amortized in parts over a fixed period.

Industry Association - shall mean associations composed of
companies engaged in the business of banking, finance, credit and
payments.

Minimum amount due or minimum payment required - the
minimum amount that a cardholder is required to pay on or
before the payment due date for a particular billing period/cycle
which may include:

(i) total outstanding balance multiplied by the required
payment percentage or a fixed amount whichever is higher;

(ii) any amount which is part of any fixed monthly instalment
that is charged to the card;

(iii) any amount in excess of the credit line; and

(iv) all past due amounts, if any


p. Outstanding balance - the amount to be repaid at any point in
time

q. Statement cut-off date - the end date of a billing cycle as
determined by the credit card issuer, when account activities
(purchases, payments, charges) during the billing cycle are
summarized.

r, Statement of account or billing statement - Regular statement
listing of the purchases, payment and other debits and credits
made to the credit card account within the billing cycle.

s. Supplementary card or extension card - a card issued to another
person whose credit limit is consolidated with the primary
cardholder.

Article 6. Minimum requirements for risk management system of
credit card issuers - To effectively deliver services and at the same
time safeguard the credit card issuer and acquiring bank’s interests,
they must establish an appropriate system for managing risk exposures
arising from credit card operations. Such risk management system shall
be documented in a complete and concise manner, and shall cover the
organizational set-up for the institution engaged in or unit handling the
credit card business, internal and external functions, and internal
control system.

Article 7. Minimum requirements for the issuance of credit cards -
Before issuing credit cards. Credit card issuers shall conduct know-your-
client (KYC) procedures and exercise proper diligence in ascertaining
that applicants possess good credit standing and are financially capable
of fulfilling their credit commitments.

Article 8. Service level agreement - there shall be in the service level
agreement between the acquiring banks and their partner merchants, a


provision requiring merchants to perform due diligence to establish the
identity of the cardholders.

Nothing in this law shall preclude the card issuers from verifying or
seeking confirmation with the card holder or designated contract detail
any purchase if in its assessment there is reasonable concern as to the
validity of said purchase

Article 9. Determination of credit card limit; Changes thereof - Credit
card issuers shall determine, based on the credit standing and financial
capacity of the card holder, the credit limit to be extended to the
cardholder. The card issuers may thereafter implement changes in the
credit limit applicable of the account based on its risk management
policies and guidelines: Provided, that the card holder is notified of such
changes: Provided, further, that any credit limit increase may be
declined by the cardholder: Provided, finally, that the cardholder has an
option to request for a credit limit adjustment subject to the approval
of the credit card issuer.

Article 10. Information to be Disclosed - Credit Card issuers shall
disclose to all credit cardholders and potential credit cardholders the
following information:

a. Finance charges for unpaid amounts after payment due date:

b. The percentage that the interest bears to the total amount to be
financed expressed as a simple monthly or annual rate, as the
case may be, on the outstanding balance of the obligation;

c. The default, late payment/ penalty fees or similar delinquency
related charges payable in the event of late payments: Provided,
that late payment or penalty fees shall be based on the unpaid
minimum amount due or a prescribed minimum fixed amount:
Provided, further, that said late payment or penalty fees maybe
base on the total outstanding balance of the credit card
obligation, including amounts payable under installment terms or
deferred payment schemes, if the contract between the issuer


and the cardholders contains an “acceleration clause” and the
total outstanding balance of the credit card is classified and
reported as past due;

d. The method of determining the amount of interest and/or
delinquency charges may be imposed

e. The method of determining the amount of interest and/or
delinquency charges, including any minimum or fixed amount
imposed as interest and/or delinquency charge;

f. Other fees, such as membership/ renewal fees/ processing fees,
over-the-limit fees, collection fees, credit investigation fees and
attorney’s fees.

g. For transaction made in foreign currencies and/or outside the
Philippines, for dual currency accounts (peso and dollar billings),
as well as payments made by credit cardholders in any currency
other than the billing currency, the manner of conversion from
the transaction currency and payment currency to Philippine
pesos or billing currency, which may be a definition or general
description of conversion rates (e.g. The international rates of
credit card networks plus mark-up, if any);

h. A reminder to the cardholder in the billing statement, or its
equivalent document, that payment of only the minimum amount.
due or any amount less than the total amount due for the billing
cycle/period would mean the imposition of interest and/or other
charges. A written statement in the following form must be
printed in the monthly billing statement - “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”: and

i. Any other information that may be required by the BSP


The credit card issuer shall endeavor to convey said information in
a manner that is understandable by the credit card holder: Provided,
that the items enumerated above may be include quarterly at the
minimum, in the billing statement in a table format

Article 11. Computation to be disclosed - in addition to the foregoing,
a credit card issuer shall to the extent practicable, provide a detailed
explanation and a clear illustration of the manner by which all charges
and fees are computed.

Every billing statement shall contain clear and concise repayment
information that would apply to the outstanding balance of the
consumer placed in a conspicuous place and prominent location on the
billing statement. The repayment information shall also include the
number of months (rounded to the nearest month) that it would take to
pay the entire amount of that balance excluding installment, if the
consumer pays only the required minimum monthly payments and if no
further advance are made.

Compliance with this Article may be deferred for such reasonable time
as the BSP may determine for credit card issuers to modify their systems
accordingly.

Article 12. Over-the-limit transaction - if a cardholder breaches his
credit limit by a new transaction, the subject transaction may be
processed subject to the discretion of the credit card issuer: Provided,
that no over the limit fee shall be charged unless the cardholder
provides expressed consent to be charged the over the limit fee or
unless that account remains to be over the limit on the account’s next
statement date: Provided, further, that such fees are clearly and
prominently disclosed in the table of fees and charges.

Article 13. Lost or stolen card - In case a credit card is lost or stolen,
any transaction prior to reporting to the credit card issuer shall be for
the account of the cardholder.


Article 14. Confidentiality of information - Credit card issuers, their
officers and employees shall keep strictly confidential the data in the
card holder, except under any of the following circumstances:

a.

b.

Disclosure of information is with the consent of the cardholder;

Release, submission or exchange of customer information with,
credit information bureaus, industry association, and Card
Association;

. Upon Orders of Court of competent jurisdiction or any government

office or agency authorized by law, or under such conditions as
may be prescribed by the Monetary Board of the BSP;

. Disclosure to third party service providers solely for the purpose

of assisting or rendering services to the credit card issuer and for
recovery purposes or to enforce its rights against the cardholder

. Disclosure to third parties such as insurance companies, solely for

the purpose of insuring the credit card issuer from cardholder
default or other credit loss, and the cardholder from fraud or
unauthorized charges; and,

Disclosure to third parties for the purpose of investigating fraud or
unauthorized activities or mitigating risk involving card issuance,
use and acquiring.

Provided that, the recipient of information pursuant to items “a” to “f”
shall likewise be bound to strictly keep confidential the data on the
cardholder; Provided further, that the recipients of information other
than those enumerated under item a, b, and f are not allowed to further
disclose information/data.

Article 15. Customer Assistance Unit - The card issuer shall establish a
consumer assistance unit within its organization responsible for providing
prompt action for the expeditious resolution of complaints, inquiries and
request.


Article 16. Complaint on billing error or discrepancy - Credit card
issuers shall give cardholders up to sixty (60) calendar days from
statement date to report any error or discrepancy in their billing
statement. The credit card issuer shall take action within ten (10)
business days from receipt of such notice.

Article 17. Appropriate manner of collection - Credit card issuers may
resort to all reasonable and legally permissible means to collect amounts
due them under the credit card agreement: Provided, that in the
exercise of their rights and performance of duties, they must observe
good faith and reasonable conduct and refrain from engaging in
unscrupulous or untoward acts.

A credit card issuer or collection agent shall not harass abuse or oppress
any person or engage in any unfair practices, as may be defined by BSP
rules and regulations, in connection with the collection of any card debt.

Article 18. Use of third-party Collection Agents - Credit card issuers
may engage qualified third party service providers/collection agents for
the purpose of assisting or rendering services in the administration of
the credit card business including for the purpose of recovery or to
enforce rights against the cardholder.

Article 19. Endorsement of Credit Card Debt collection by Credit card
Issuer to a Collection Agency - A credit card issuer shall 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: Provided, That the required notification in writing shall
be included in the terms and condition of the credit card agreement:
Provided, further, That the credit card issuer shall refer the collection
of an account to only one collection agency at any on time.

Article 20. Communication in connection with debt collection - The
credit card issuer or its collection agency may communicate with a


credit cardholder in connection with the collection of any debt through
the mode prescribed within guidelines provided by the BSP.

Article 21. Due Date - Notwithstanding any provision in the contract, if
the payment due date for a credit card falls on weekend and regular
national holidays, the card payment due date is automatically moved to
the next business day. Payment through any authorized mode, made to
any accredited payment centers of the card issuer shall be considered as
payment to the credit card issuer made on the same date.

Article 22. Application of Card Payment - Upon receipt of a payment
from a cardholder who has account that carry different interest rates for
different types of purchase (i.e. cash advances, regular purchases,
balance transfer), the credit issuer shall apply amounts in excess of the
minimum payment amount first to the fees and changes, 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. Provided that the original rates for promotional offers shall
be the basis for determining hierarchy of payment

Article 23. Termination of account - A cardholder may cancel or
terminate his account anytime: Provided, That the cardholder either
pays in full outstanding balance or enters into another agreement for
repayment of outstanding balance whether one-time or on instalments
within a fixed period of time; Provided, further, that repayment in
instalments shall only be generally subject to interest unless there is a
violation of the new agreement.

Article 24, Violation of this Act and Other Related Rules, Regulation,
Orders or Instructions - Whenever any person wilfully violates any
provision of this law or any related rules, regulation, order or
instructions, issued by the Monetary Board, the person or persons
responsible for such violation shall be punished by imprisonment of not
less than two (2) years nor more than ten (10) years or by a find of not
less than Fifty thousand Pesos (P50,000,00) nor more than two hundred
thousand pesos (P200,000,00), or both ,at the discretion of the court.


Article 25. Administrative Sanction On Credit Card - The provision of
Section 37 of Republic Act No. 7653 shall be made applicable to any
credit card issuer, acquiring bank, their directors and offers, including,
but not limited to, the administrative sanctions that may be imposed,
without prejudice to the criminal sanctions against the culpable person
provided in Article 24, for any will full violation of this law or any
regulated rules, regulations, orders or instruction issued by the Monetary
Board: Provided, that in addition to the administrative sanctions that
may be imposed, the authority of the credit card issuer credit cards may
be suspended or cancelled by the BSP.

Article 26. Repealing Clause - All other laws, decrees, executive orders,
proclamation and administrative regulations, or parts thereof
inconsistent here with repealed or modified accordingly.

Article 27. Effectivity Clause - This Act shall take effect fifteen (15)
days after its publication in at least two (2) national newspapers of
general circulation

Approved,