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THIRTEENTH CONGRESS OF THE REPUBLI 
First Regular Session 
OF THE PHILIPPINES 
S E N A T E  
S. No. 
Introduced by Senator S. R. Osmeiia 111 
EXPLANATORY NOTE 
The leaps and bounds in telecommunications technology have enabled 
transactions with banks and commercial establishments through the more 
efficient mode of electronic transfer. It has also given rise to the popular use of 
credit cards for obtaining credit from banks. 
Through this instrument, the 
cardholder makes use of electronic transfer to pay his bills and to avail of a 
revolving credit line to fund various purchases and transactions with accredited 
establishments. 
The welfare effects of this innovation is unquantifiable - 
convenience to consumers, savings on the use of currency, and the stimulus to 
economic activities through higher rates of transactions turnover. 
As early as 1973, total outstanding credit for Bank Americard (now Visa) 
and Master Charge (now Mastercard) the two topmost cards in the US, was 
reported at no less than $27 billion. In the Philippines, we have numerous credit 
card companies, including VISA, Diners’ Club, Unicard, Mastercard, PCIBankard, 
and BPI Express. The widespread popularity of credit card usage has been 
accompanied by increasing incidence of fraud, abuses, errors, and other 
situations that are matters of public concern. 
This bill seeks to establish the ground rules for the operation of credit card 
companies, defining the rights, duties and obligations of individuals and 
institutions in order to promote and safeguard public welfare. Among others, it 
provides for 
(a) a more equitable and efficient way of resolving billing disputes and 
inquiries; 
(b) the regulation of billing practices; 
(c) the prohibition of anti-competitive practices between merchants and credit 
card companies; and 
(d) clearer legal rights of consumers and credit card users. 
In view of the foregoing, early passage of this bill is earnestly requested. 
S E ~ G I O  
OSMENA I I I  
Senator 


THIRTEENTH CONGRESS OF THE REPUBLIC 
First Regular Session 
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8 ”  
A 
OF THE PHILIPPINE 
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S E N A T  
Introduced by Senator S. R. OsmeAa 111 
AN ACT 
ESTABLISHING A FAIR CREDIT BILLING SYSTEM, AND FOR OTHER 
PURPOSES 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled: 
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SECTION 1. Short Title. - This Act shall be known as the “Fair Credit 
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Billing Act of 2004.” 
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SEC. 2. Declaration of Policy and Objectives. - It is hereby declared to 
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be the policy of the State to protect the consumer against inaccurate and unfair 
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credit billing and‘ credit card practices. 
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Towards this end the State shall compliment, simplify and update existing 
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laws and statutes governing credit transactions; provide consumers with 
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remedies when confronted with billing problems; and regulate credit card 
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transaction and practices. 
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SEC. 3. Definition of Terms. - For the purposes of this Act, the term: 
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(a) 
“Bank” means the Central Bank of the Philippines. 
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(b) 
“Billing Cycle” refers to the period given a cardholder to purchase 
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goods and services on credit for the purpose of summarizing all his billings in that 
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particular period in the form of a statement of account. 
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(c) 
“Credit Card” means any card, plate, coupon book or other credit 
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devise existing for the purpose of obtaining money, property, labor or service on 
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credit. 
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(d) ’ 
“Cardholder” means any person issued a credit card and to whom 
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credit is extended under an agreed credit plan. 


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(e) 
“Card Issuer” refers to any credit card company which acts as an 
intermediary between the seller and the consumer. 
It pays the seller, at a 
discounted price, the amount of goods and services purchased by the cardholder 
and collects from the latter the undiscounted price therefor. 
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“Creditor” refers to any person engaged in the regular business of 
extending credit for which a finance charge is required whether in connection 
with loans, sale or lease of property or services on time, credit or installment 
basis, either as a principal or as agent. 
(9) 
“Finance Charge” includes interest, fees, service charge discounts, 
and such ,other charges incidents to the extension of credit as the Bank may by 
regulations prescribe. 
(h) 
“Free rid period” means the time period within which the consumer 
may pay the full amount of the bill in order not to incur any finance charge. 
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“Obligor” refers in general to a person who purchases on credit 
directly from creditor or indirectly by use of credit card, check or other device. 
(j) 
“Open-end credit plan” means a consumer credit extended on an 
account pursuant to a plan under which: 
I) 
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The creditor may permit the person to make purchases or obtain 
loans, from time to time, directly from the creditor or indirectly by use of credit 
card, check or other device; 
2) 
The person has the privilege of paying the balance in full or in 
installments; and 
3) 
A finance charge may be computed by the creditor from time to 
time on an outstanding unpaid balance. 
SEC. 4. Billing Error. - As used in this Act a billing error shall consist of 
any of the’following: 
(a) 
A reflection on a statement of an extension of credit which was not 
made to the obligor or, if made, was not in the amount reflected on such 
statement. 
(b) 
A reflection on a statement of an extension of credit for which the 
obligor requests additional clarification including documentary evidence thereof. 


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(c) 
A reflection on a statement of goods or services not accepted by 
the obligor or his assignee or not delivered to the obligor or his assignee with the 
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agreement made at the time of a transaction. 
(d) 
The creditor’s failure to reflect properly on a statement a payment 
made by the obligor or a credit issued to the obligor. 
(e) 
A computation error or similar error of an accounting nature of the 
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creditor on a statement. 
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SEC. 5. Written Acknowledgement. - If a creditor, within sixty (60) days 
after having transmitted to an obligor a statement of the latter’s account in 
connection with the extension of consumer credit, receives at the address 
disclosed for the purpose of receiving billing inquiries a written notice referred to 
in Section 7 hereof, the creditor, within thirty (30) days after the receipt of such 
notice shall send a written acknowledgement to the obligor, unless the action 
required in the next succeeding Section is taken within such thirty-day period. 
Any other error described in the regulations of the Central Bank. 
SEC. 
6. 
Correction of Billing Errors. - Under the circumstances 
described in Section 5, and not later than two complete billing cycles which in no 
event shall exceed ninety (90) days after the receipt of the notice and prior to 
taking any action to collect the amount, or any part thereof, indicated by the 
obligor under Section 7 (b) may take either of the following steps: 
(a) 
Make appropriate corrections in the account of the obligor, 
including the crediting of any finance charges on amounts erroneously billed, and 
transmit to the obligor a notification of such corrections and the creditor’s 
explanation of any change in the amount indicated by the obligor under Section 
7(b), and if any such change is made and the obligor so requests, copies of 
documentary evidence of the obligor’s indebtedness; or 
(b) 
Send a written explanation or clarification to the obligor after having 
conducted an investigation, setting forth to the extent applicable reasons why 
the creditor believes the account of the obligor was correctly shown in the 
statement, and, upon request of the obligor, provide copies of documentary 
evidence of the obligor’s indebtedness. In the case of a billing error where the 


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obligor alleges that the creditor’s billing statement reflects goods not delivered to 
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the obligor or his assignee in accordance with the agreement made at the time of 
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the transaction, a creditor may not construe such amount to be correctly shown 
4 unless he determines that such goods were actually delivered, mailed or 
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otherwise sent to the obligor and provides the obligor with a statement of such 
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determination. 
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SEC. 7. Written Notice. - The creditor shall perform the act required of 
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him under Section 5 and 6 after receipt of a written notice from the obligor in 
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which the obligor: 
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(a) 
sets forth or otherwise enables the creditor to identify the name and 
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account number, if any, of the obligor; 
(b) 
indicates the obligor’s belief that the statement contains a billing 
error and the amount of such billing error; and 
(c) 
sets forth the reasons for the obligor’s belief that the statement 
contains a billing error. 
SEC. 8. Relief of Creditor. - The creditor has no further responsibility if 
the obligor: 
(a) 
has agreed, after giving such written notice and before the 
expiration of the prescribed time limit, that the statement was indeed correct, or 
(b) 
continues to make substantially the same allegation with respect to 
an alleged billing error which the creditor has acted upon by complying with the 
provisions of Section 5 and 6. 
SEC. 9. Sending of Statements. - An action to collect an amount or any 
part thereof, indicated by an obligor under Section 4 (b) does not include the 
sending of statements of account to the obligor following written notice from the 
obligor as specified under Section 7, if: 
(1) 
the obligor’s account is not restricted or closed because of the 
failure of the obligor to pay the amount indicated under Section 7 (b), and 
(2) 
the creditor indicates the payment of such amount is not required 
pending the creditor’s compliance with the provisions of this Act. Nothing in this 


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Section shall be construed to prohibit any action by a creditor to collect any 
amount which has not been indicated by the obligor to contain a billing error. 
SEC. 10. Prohibition Against Restriction or Closure. - Pursuant to the 
regulations of the Board, a creditor operating an open-end consumer credit plan 
may not, prior under Section 5 and 6 restrict or close an account with respect to 
which the obligor has indicated pursuant to Section 7 that he believes such 
account to contain a billing error solely because the obligor’s failure to pay the 
amount indicated to be in error. Nothing in this Section shall be deemed to 
prohibit a creditor from applying against the credit limit on the obligor’s account 
the amount indicated to be in error. 
SEC. 11. Forfeiture of Right to Collect. - Any creditor who fails to 
comply with the requirements of Sections 4 to 10 and Section 12 forfeits any right 
to collect from the obligor the amount indicated by the obligor under Section 7 
(b), and any finance charges thereon, except that the amount required to be 
forfeited under this Section may not exceed One thousand pesos (PI ,000.00). 
SEC. 12. Regulation of Credit Reporls. - After receiving a notice from an 
obligor as provided in Section 5 to 7, a creditor or his agent may not directly or 
indirectly threaten to report to person adversely on the obligor’s failure to pay the 
amount indicated by the obligor under Section 7 (b) and such amount may not be 
reported as delinquent to any third party until the creditor ahs met the 
requirements of Sections 4 to 10 and has allowed the obligor the same number 
of days, which shall not be less than ten ( I O )  days, and thereafter to make 
payment as provided under the credit agreement with the obligor for the payment 
of undisputed amounts. 
If a creditor receives a further written notice from an obligor that an 
amount is still in dispute within the time allowed for payment under the next 
preceding paragraph, a creditor may not report to any third party the amount that 
the obligor is delinquent because the obligor has failed to pay an amount which 
he has indicated under Section 7 (b), unless the creditor also reports that the 
amount is in dispute and, at the same time, notifies the obligor of the name and 


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address of each party to whom the creditor is reporting information concerning 
the delinquency. 
A creditor shall report any subsequent resolution of any delinquencies 
reported pursuant to the immediately preceding paragraph to the parties to whom 
such delinquencies were initially reported. 
SEC. 13. Length of Billing Period. - If an open-end credit plan provides 
a time period which an obligor may repay any portion of the credit extended 
without incurring an additional finance charge, such additional finance charge 
may not be imposed unless statement which includes the amount upon which the 
finance charge for the period is based was delivered at least fifteen (15) days 
prior to th.e date specified in the statement by which payment must be made in 
order to avoid imposition of that finance charge. 
This Section does not apply in any case where a creditor has been 
prevented, delayed, or hindered in making timely delivery of such periodic 
statement within the time period specified in such subsection because of an act 
of God, war, natural disaster, strike, or other excusable or justifiable cause, as 
determined under the regulations of the Central Bank. 
SEC. 14. Prompt Crediting of Payments. - Payments received by the 
creditor pl.an shall be posted promptly to the obligor’s account as specified in the 
regulations of the Central Bank. Such regulations shall prevent a finance charge 
from being imposed on any obligor if the creditor has received the obligor’s 
payment in readily identifiable form in the amount, manner, location, and time 
indicated by the creditor to avoid the imposition thereof. 
SEC. 15. Crediting Excess Payments. - If an obligor transmits funds to a 
creditor in excess of the total balance due to an open-end consumer credit 
account, the creditor shall promptly inform the obligor of such excess payment 
and, upon request of the obligor, refund the amount of the overpayment. 
Otherwise, the creditor may credit such amount to the obligor’s account. 
SEC. 16. Prompt Notification of Return. - With respect to any sales 
transaction where a credit card has been used to obtain credit, where the seller 
is a person other than the card issuer, and when the seller accepts or allows a 


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return of the goods or forgiveness of a debit for services which were the subjects 
of such sale, the seller shall promptly transmit to the credit card issuer, a credit 
statement with respect thereto and the credit card issuer shall credit the account 
of the obligor for the amount of transaction. 
SEC. 17. Use of Cash Discounts. - With respect to credit cardholder 
who may avail of cash discounts in sales transactions in which the seller is a 
person other than the card issuer, the card issuer may not, by contract or 
otherwise, prohibit such seller from offering a discount to a cardholder to induce 
the cardholder to pay by cash, check or similar means rather than use a credit 
card. 
With respect to any sales transaction, any discount not in excess of five 
per centum (5%) offered by the seller for the purpose of inducing payment by 
cash, check or other means not involving the use of credit card shall not 
constitute a finance charge if such discount is offered to all prospective buyers 
clearly and conspicuously in accordance with regulations of the Central Bank. 
SEC. 
18. 
Prohibition of lie-in Services. - Notwithstanding any 
agreement to the contrary, a card issuer may not require a seller, as a condition 
to participating in a credit card plan, to open an account or procure any other 
service from the.card issuer or its subsidiary or agent. 
SEC. 19. Prohibition of Offsets. - A card issuer may not take any action 
to offset a cardholder’s indebtedness arising in connection with a consumer 
credit transaction under the relevant credit card plan against funds of the 
cardholder held on deposit with the card issue unless such action was previously 
authorized in accordance with a credit plan whereby the cardholder agrees 
periodically to pay debts incurred in his open-end credit account by permitting the 
card issuer periodically to deduct all or a portion of such debt from the 
card holder’s deposit account. 
In the case of any credit account in existence on the effective date of this 
Section the previous written authorization shall not be required until after such 
effective date when such account is renewed but in no case later than one (1) 
year after. such effective date. Such written authorization shall be deemed to 


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exist if the card issuer has previously notified the cardholder that the use of his 
credit card account will subject any funds which the card issuer holds in deposit 
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accounts of such cardholder to offset against any amounts due and payable on 
his credit card account which have not been paid in accordance with the terms of 
the agreement between the card issuer and the cardholder. 
SEC. 20. Attachmenf of Levy. - Nothing in the next preceding Section 
shall alter or effect the right under existing laws of a card issuer to attach or 
otherwise levy upon funds of a cardholder held on deposit with the card issuer. 
SEC. 21. Rights of Credit Card Holders. - Subject to the limitation 
contained in Section 22, a card issuer who has issued a credit card to a 
cardholder pursuant to an open-end consumer credit plan shall be subject to all 
claims except tort claims, and defenses arising out of any transaction in which 
the credit card is issued as a method of payment or extension of credit if: 
(a) 
the obligor has made a good faith attempt to obtain satisfactory 
resolution of a disagreement or problem relative to the transaction form the 
person honoring the credit card; 
(b) 
(PI ,000.00); and 
(c) 
the amount of the initial transaction exceeds One thousand pesos 
the place where the initial transaction occurred was in the same 
province or city as the mailing address previously provided by the cardholder: 
Provided, That the limitations set forth in paragraphs (b) and (c) with respect to 
an obligor’s right to assert claims and defenses against a card issuer shall not be 
applicable to any transaction in which the person honoring the credit card (I) 
is 
the same person as the card issuer, (2) is controlled by the card issuer; (3) is 
under direct or indirect common control with the card issuer; (4) is a franchised 
dealer in the card issuer’s products or services a mail solicitation made by or 
participated in by the card issuer in which the cardholder is solicited to enter into 
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SEC. 22. Amount of Claims. - The amount of claims or defenses 
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asserted by the cardholder may not exceed the amount of credit outstanding with 
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respect to such transaction at the time the cardholder first notifies the card issuer 
such transaction by using the credit card issuer by the card issuer. 


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or the person honoring the credit card of such claim or defense. For the purpose 
of determining the amount of credit outstanding in the preceding sentence, 
payments and credits to the cardholder’s account are deemed to have been 
applied, in the order indicated, to the payment of: 
(a) 
(b) 
(c) 
late charges in the order of their entry to the account; 
finance charges in the order of their entry to the account; 
debits to the account other than those set forth above, in the order 
in which each debit entry to the account was made. 
SEC. 23. Charge for Exceeding Credit Limit. - If a cardholder makes 
purchases through the use of the credit card but exceeds his credit limit due to 
the frequent delays in billings, with the result that the cardholder may not recall 
which “old” charges has not yet to be billed, the creditor shall not impose a tax 
and penalty charge and shall honor the merchant or seller’s charge slips that 
exceed credit limits: Provided, however, That such excesses are infrequent and 
there is no reason to suspect that the cardholder is in a financial difficulty. 
A charge for exceeding a credit limit is not considered part of the finance 
charge: Provided, That 
( I )  The charge is not part of the regular credit plan; 
(2) The consumer is not encouraged to exceed the credit limit and incur 
the charge; and 
(3) The excess giving rise to the charge are inadvertent and infrequent. 
SEC. 24. Disclosure of Fair Credit Billing Rights. - Any creditor shall 
furnish to each person to whom credit is extended, prior to the consummation of 
the transaction, a statement in writing and in the form prescribed by regulations 
at the back of the protection provided by Sections 4 to 1 1  and 21 to 22 and the 
creditor’s responsibilities under Section 12 and 21 to 22. 
In the case of any existing account under an open-end consumer credit 
plan, the items described in the preceding sentence not previously disclosed, 
shall, after the effective date of this Act, be disclosed in a notice mailed or 
delivered to the obligor not later than the time of mailing the next statement of 
account. 


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SEC. 25. Rules and Regulations. - The Central Bank of the Philippines 
shall prescribe such rules and regulations as may be necessary or proper to 
carry out the provisions of this Act. 
SEC. 26. Separability Clause. - If for any reason any provision of this 
Act or the'application thereof to any person or circumstances shall be questioned 
in any court, and shall be held to be unconstitutional or invalid, other provision of 
this Act or the application of such provision to other persons or circumstances 
shall not be affected thereby. 
SEC. 27. Repealing Clause. - All acts, laws or parts of acts or laws, 
decrees, rules and regulations inconsistent with the provisions of this Act are 
hereby repealed and/or modified accordingly. 
SEC. 28. Effectivity. - This Act shall take effect fifteen (15) days after its 
publication in the Official Gazette or in at least two (2) newspapers of general 
circulation whichever comes earlier. 
Approved,