Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

FIFTEENTH CONGRESS
First Regular Session

4819

House Bill No.

Introduced by The Honorable JUAN C. PONCE ENRILE, JR.

EXPLANATORY NOTE

‘This measure seeks to reform the credit card industry and promote consumer
protection and financial reform that, among others: will place a cap on the interest
rates charged on deferred payments made on credit card purchases to one percent per
month, strengthen the provisions of the Electronic Commerce Act to protect
merchants against arbitrary charge backs, and 0 promote accountability,
responsibility and disclosure in the credit card industry.

‘The credit card industry consists of some 15 major credit card companies that
process over Php100 Billion worth of credit card transactions on an annual basis
‘They facilitate the transactions made by over 4 Million credit card holders and 30,000
‘or more retail and service establishments nationwide.

According to the records of the Bangko Sentral, credit card receivables as of
the 3 Quarter of 2010 amounted to some Php134 Billion. Even if the 12% loss ratio
is deducted from this amount, and the average 3.5% interest rate is applied (0 the
remainder, credit card companies still rake in a minimum of Php458 Million a month
in interest income alone - without the other fees, charges and penalties.

The credit card business therefore is not a losing proposition. The industry
cannot only live off the usurious rates that they charge the unwary cardholders, but
also make a hefty profit from it.

Without Bangko Sentral intervention, the same rules will prevail for good and
bad credit card users - with the prime users covering the default of the sub-prime
users. Without intervention, compounded interests and penalty rates can skyrocket to
42% per annum due to deferred or late payments - even if the proximate cause
the failure of credit card companies to deliver the billing statement on time or failure
of other banks to post payment on time. Without intervention, chargebacks based on
fraudulent credit card purchases will be par for the course.

‘The Supreme Court has spoken on the matter on three (3) separate cases: In
2004, Imperial versus Jaucian (G.R. No. 149004); in 2008, Chua versus Timan (G.R.
No. 17045) and in 2009, Macalinao versus BPI (G.R. No. 175490. In these rulings,


the highest court of the land has consistently said: “interest rates of 3% per month or
higher are excessive, iniquitous, unconscionable and exorbitant.”

‘The measure caps interest rates to 12% per annum leaving to the banks how
the spread of the 12% over 12 months will be made. Such a provision is in
recognition of the market forces that dictate interest movements. ‘The cap is at the per
annum level and not monthly.

Hence, this reform measure is filed to ensure that a law covers what certain
stakeholder’s claim as mere “rulings” of the Supreme Court and no implementing
order or circular has been made by the Bangko Sentral ng Pilipina

Passage of this measure is earnestly requested,

JUAN & POD ILE, JR.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

FIFTEENTH CONGRESS
First Regular Session

House BillNo._ _ 4819

Introduced by The Honorable JUAN C. PONC

NRILE, JR.

AN ACT
PROVIDING FOR REFORMS IN LENDING AND ACC!
PROMOTING ACCOUNTABILITY, RESPONSIBILITY AND DISCLOSURE
IN AVAILMENT AND USE AND FOR OTHER PURPOSES

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 and cited as the “Credit
Access and Protection Reform Act of 2011.”

SEC. 2. Statement of Policy — It is hereby declared the policy of the State to
promote a just and dynamic social order that will ensure the prosperity and
independence of the nation and free the people from poverty through policies that
provide adequate social services, promote full employment, a rising standard of
living, and an improved quality of life for all. Consequently, a healthy flow of credit
in the economy is vital but for too long credit card contracts and practices have been
unfairly and deceptively complicated leading consumers to pay more than they
reasonably expect. Hence, consumers have to be protected by improving disclosures
and ending unfair practices through reforms that are based on transparency,
accountability and mutual responsibil

SEC. 3. Definition of Terms. ~ For purposes of this Act, the following terms
shall mean:

A. ‘Outstanding Balance’ means the amount owed on a credit card account
under an open end consumer credit plan as of the end of the 4th day afier the date on
which the creditor provides notice of an increase in the annual percentage rate, fee, or
finance charge in accordance with this Act.

B. ‘Fixed’, when appearing in conjunction with a reference to the annual
percentage rate or interest rate applicable with respect to such account, may only be
used to refer fo an annual percentage rate or interest rate that will not change or vary
for any reason over the period specified clearly and conspicuously in the terms of the
account,

C. ‘College affinity card’ means a credit card issued by a credit card issuer
under an open end consumer credit plan in conjunction with an agreement between
the issuer and an institution of higher education, or an alumni organization or



foundation affiliated with or related to such institution, under which such cards are
issued (o college students who have an affinity with such institution, organization and
the creditor has agreed to 1. donate a portion of the proceeds of the credit card to the
institution, organization, or foundation (including a lump sum or I-time payment of
money for access); 2. offer discounted terms to the consumer; or 3. the credit card
bears the name, emblem, mascot, or logo of such institution, organization, or
foundation, or other words, pictures, or symbols readily identified with such
institution, organization, or foundation,

D. ‘College student credit card account” means a credit card account under an
open-end consumer credit plan established or maintained for or on behalf of any
college student,

E. “College student’ means an individual who is a full-time or a part-time
student attending an institution of higher education.

E, ‘Institution of higher education’ has the same meaning as found in the
Republic Act No. 7772 or The Higher Education Act of 1994,

G. ‘Dormancy fee and inactivity charge or fee” means a fee, charge, or penally
for non-use or inactivity of a gift certificate, store gift card, or general-use prepaid
card.

H. ‘General-use prepaid card’ means a card or other payment code or device
issued by any person that is 1. redeemable at multiple, unaffiliated merchants ot
service providers, or automated teller machines; 2. issued in a requested amount,
whether or not that amount may, at the option of the issuer, be increased in value or
reloaded if requested by the holder; 3. purchased or loaded on a prepaid basis; and 4.
honored, upon presentation, by merchants for goods or services, or at automated teller
machines

1. ‘Gift certificate’ means an electronic promise that is 1. redeemable at a
single merchant or an affiliated group of merchants that share the same name, mark,
or logo; 2. issued in a specified amount that may not be increased or reloaded; 3.
purchased on a prepaid basis in exchange for payment; and 4. honored upon
presentation by such single merchant or affiliated group of merchants for goods or
services

J. ‘Store gift card” means electronic promise, plastic card, or other payment
code or device that is 1. redeemable at a single merchant or an affiliated group of
merchants that share the same name, mark, or logo; 2. issued in a specified amount,
whether or not that amount may be increased in value or reloaded at the request of the
holder; 3. purchased on a prepaid basis in exchange for payment; and 4. honored upon
presentation by such single merchant or affiliated group of merchants for goods or
services

‘The terms “general-use prepaid card, “gift certificate’, and “store gift card’ as
defined under this Section shall not include an electronic promise, plastic card, or
payment code or device that is 1. used solely for telephone services; 2. reloadable and
not marketed or labeled as a gift card or gift certificate; 3. a loyalty, award, or
promotional gift card; 4. not marketed to the general public; 5. issued in paper form
only (including for tickets and events); or 6. redeemable solely for admission to
events or venues at a particular location or group of affiliated locations, which may
also include services or goods obtainable at the event or venue after admission; or in
conjunction with admission to such events or venues, at specific locations affiliated
with and in geographic proximity to the event or venue

K. ‘Service fee” means a periodic fee, charge, or penalty for holding or use of
a gift certificate, store gift card, or general-use prepaid card. With respect to a



general-use prepaid card, the term “service fee’ does not include a one-time initial
issuance fee.

TITLE L
TRANSPARENCY AND ACCOUNTABILITY IN CREDIT CARD USE

SEC. 4. Interest Cap Per Annum. — Under no instance shall interest rates
charged to credit cardholders be more than 12% per annum.

SEC. 5. Protection of Credit Cardholders. — When such circumstances occur,
credit cardholders shall be protected:

A In case of any credit card account under an open-end consumer credit
plan, a creditor shall provide a written notice of an increase in an annual percentage
rate not later than 45 days prior to the effective date of the increase.

B. In the case of any credit card account under an open end consumer
credit plan, a creditor shall provide a written notice of any significant change, as
determined by the Bangko Sentral ng Pilipinas, hereinafter referred to as BSP. in the
terms of the cardholder agreement between the creditor and the obligor, not later than
45 days prior to the effective date of the change.

C. Each notice required by paragraph A or B of this Section shall be
made in a clear and conspicuous manner, and shall contain a brief statement of the
right of the obligor to cancel the account pursuant to rules established by the BSP
before the effective date of the subject rate increase or other change.

D. Closure or cancellation of an account by the obligor shall not
constitute a default under an existing cardholder agreement, and shall not trigger an
obligation to immediately repay the obligation in full or through a method that is less
beneficial to the obligor than one of the methods described in Section 6 of this Act, or
the imposition of any other penalty or fee under existing laws.

SEC. 6. Limits On Interest Rate, Fee, And Finance Charge Increases
Applicable To Outstanding Balances. \n the case of any credit card account under an
open end consumer credit plan, no creditor may increase any annual percentage rate,
fee, or finance charge applicable to any outstanding balance, except as permitted
under Section 7 of this Act.

SEC. 7. Exceptions. - The prohibition under Section 6 of this Act shall not
apply to:
‘A. An increase in an annual percentage rate upon the expiration of a specified
period of time: Provided, That
1) prior to commencement of that period, the creditor disclosed to the
consumer, in a clear and conspicuous manner, the length of the period and the
annual percentage rate that would apply after expiration of the period;
2) the increased annual percentage rate does not exceed the rate
disclosed pursuant to subparagraph (1); and
3) the increased annual percentage rate is not applied to transactions
that occurred prior to commencement of the period;
B. An increase in a variable annual percentage rate in accordance with a credit
card agreement that provides for changes in the rate according to operation of an
index that is not under the control of the creditor and is available to the general
public;



C. An increase due to the completion of a workout or temporary hardship
arrangement by the obligor or the failure of the obligor to comply with the terms of a
workout or temporary hardship arrangement, Provided That, the annual percentage
rate, fee, or finance charge applicable to a category of transactions following any such
increase does not exceed the rate, fee, or finance charge that applied to that category
of transactions prior to commencement of the arrangement; and the creditor has
provided the obligor, prior to the commencement of such arrangement, with clear and
conspicuous disclosure of the terms of the arrangement (including any increases due
to such completion or failure); or

D. An increase due solely to the fact that a minimum payment by the obligor
has not been received by the creditor within 60 days after the due date for such
payment, Provided further, That the creditor shall include, together with the notice of
such increase required under this Act, a clear and conspicuous written statement of
the reason for the increase and that the increase will terminate not later than 6 months
after the date on which it is imposed, if the creditor receives the required minimum
payments on time from the obligor during that period; and terminate such increase not
later than 6 months after the date on which it is imposed, if the creditor receives the
required minimum payments on time during that period.

SEC. 8. Repayment of Outstanding Balance. - The creditor shall not change
the terms governing the repayment of any outstanding balance, except that the
creditor may provide the obligor with one of the methods described in Section 6 in
repaying any outstanding balance, or a method that is no less beneficial to the obligor
than one of those methods.

SEC. 9. Methods of Repaying Outstanding Balance. - The methods described
in this Act on repaying outstanding balance are: A. an amortization period of not less
than 5 years, beginning on the effective date of the increase set forth in the notice
required under this Act; or B. a required minimum periodic payment that includes a
percentage of the outstanding balance that is equal to not more than twice the
percentage required before the effective date of the increase set forth in the notice
required under this Act.

SEC. 10. Interest Rate Reduction On Open End Consumer Credit Plans. fa
creditor increases the annual percentage rate applicable to a credit card account under
an open end consumer credit plan, based on factors including the credit risk of the
obligor, market conditions, or other factors, the creditor shall consider changes in
such factors in subsequently determining whether to reduce the annual percentage rate
for such obligor.

With respect to any credit card account under an open end consumer credit,
plan, the creditor shall a) maintain reasonable methodologies for assessing the factors
described herein; b) not less frequently than once every 6 months, review accounts as
to which the annual percentage rate has been increased a year after the passage of this
Act, to assess whether such factors have changed, including whether any risk has
declined; c) reduce the annual percentage rate previously increased when a reduction
is indicated by the review; and d) in the event of an increase in the annual percentage
rate, provide in the written notice required under this Act, a statement of the reasons
for the increase,

This Section shall not be construed to require a reduction in any specific
amount. The BSP shall issue final rules not later than 9 months after the date of



¢nactment of this Act to implement the requirements of and evaluate compli
this Section shall become effective 12 months after that date of enactment.

e with

SEC. 11. Additional Limits on Interest Rate Increases. - A. Except in the
case of an increase described in paragraph A, B, C or D of Section 7 of this Act, no
increase in any annual percentage rate, fee, or finance charge on any credit card
account under an open end consumer credit plan shall be effective before the end of
the 1-year period beginning on the date on which the account is opened,

b) Promotional Rate Minimum Term. - No increase in any annual percentage
rate applicable to a credit card account under an open end consumer credit plan that is
a promotional rate, as defined by the BSP shall be effective before the end of the 6-
month period beginning on the date on which the promotional rate takes effect,
subject to such reasonable exceptions as the BSP may establish, by rule.

SEC. 12. Limits on Fees and Interest Charges. - Except as provided in Section
13 of this Act, a creditor may not impose any finance charge on a credit card account
under an open end consumer credit plan as a result of the loss of any time period
provided by the creditor within which the obligor may repay any portion of the credit
extended without incurring a finance charge, with respect to: 1) any balances for days
billing cycles that precede the most recent billing cycle; or 2) any balances or
portions thereof in the current billing cycle that were repaid within such time period.

SEC. 13. Exceptions. - Section 12 of this Act does not apply to a) any
adjustment to a finance charge as a result of the resolution of a dispute; or b) any
adjustment to a finance charge as a result of the return of a payment for insufficient
funds.

SEC. 14. Opt-in Required for Over-the-Limit Transactions if Fees Are
Imposed a) In the case of any credit card account under an open end consumer
credit plan under which an over-the-limit fee may be imposed by the creditor for any
extension of credit in excess of the amount of credit authorized to be extended under
such account, no such fee shall be charged, unless the consumer has expressly elected
to permit the creditor, with respect to such account, to complete transactions
involving the extension of credit under such account in excess of the amount of credit
authorized

b) No election by a consumer under the aforementioned paragraph shall take
effect unless the consumer, before making such election, received a notice from the
creditor of any over-the-limit fee in the form and manner, and at the time, determined
by the BSP. If the consumer makes the election referred to in this Section, paragraph
a, the creditor shall provide notice to the consumer of the right to revoke the election,
in the form prescribed by the BSP, in any periodic statement that includes notice of
the imposition of an over-the-limit fee during the period covered by the statement.

c) A consumer may make or revoke the election referred to in paragraph a
orally, electronically, or in writing, pursuant to regulations prescribed by the BSP.
‘The BSP shall prescribe regulations to ensure that the same options are available for
both making and revoking such election.

4) A consumer may make the election referred to in this Section, paragraph a,
at any time, and such election shall be effective until the election is revoked in the
manner prescribed under paragraph c.

€) The BSP shall prescribe regulations (1) governing disclosures under this



subsection; and (2) that prevent unfair or deceptive acts or practices in connection
th the manipulation of credit limits designed to increase over-the-limit fees or other
penalty fees.

) Nothing in this Section shall be construed as to prohibit a creditor from
completing an over-the-limit transaction, provided that a consumer who has not made
a valid election under paragraph a) hereof is not charged an over-the-limit fee for such
transaction.

g) With respect to a credit card account under an open end consumer credit
plan, an over-the-limit fee may be imposed only once during a billing cycle if the
credit limit on the account is exceeded, and an over-the-limit fee, with respect to such
excess credit, may be imposed only once in each of the 2 subsequent billing cycles,
unless the consumer has obtained an additional extension of credit in excess of such
credit limit during any such subsequent cycle or the consumer reduces the outstanding
balance below the credit limit as of the end of such billing cycle.

h) With respect to a credit card account under an open end consumer credit
plan, the creditor may not impose a separate fee to allow the obligor to repay an
extension of credit or finance charge, whether such repayment is made by mail,
electronic transfer, telephone authorization, or other means, unless such payment
involves an expedited service by a service representative of the creditor.

SEC. 15. Reasonable Penalty Fees on Open End Consumer Credit Plans,

a) The amount of any penalty fee or charge that a card issuer may impose with
respect to a credit card account under an open end consumer credit plan in connection
with any omission with respect to, or violation of, the cardholder agreement,
including any late payment fee, over-the-limit fee, or any other penalty fee or
charge, shall be reasonable and proportional to such omission or violation.

b) The BSP, in consultation the Philippine Deposit Insurance Corporation, the
Bankers Association of the Philippines, Association of Rural and Thrift Banks, the
Credit Card Association of the Philippines and consumer groups duly registered with
the Securities and Exchange Commission, shall issue final rules not later than 9
months after the date of enactment of this Section, to establish standards for assessing
whether the amount of any penalty fee or charge described under subsection (a) is
reasonable and proportional to the omission or violation to which the fee or charge
relates.

) In issuing rules required by this Section, the BSP shall consider (1) the cost
incurred by the creditor from such omission or violation; (2) the deterrence of such
omission or violation by the cardholder; (3) the conduct of the cardholder; and (4)
such other factors as the BSP may deem necessary or appropriate.

d) In issuing rules required by this subsection, the BSP may establish different
standards for different types of fees and charges, as appropriate.

¢) The BSP, in consultation the Philippine Deposit Insurance Corporation, the
Bankers Association of the Philippines, Association of Rural and Thrift Banks, the
Credit Card Association of the Philippines and consumer groups duly registered with
the Securities and Exchange Commission, may issue rules to provide an amount for
any penalty fee or charge described under subsection (a) that is presumed to be
reasonable and proportional to the omission or violation to which the fee or charge
relates."

SEC. 16. Application of Card Payments. - Upon receipt of a payment from a
cardholder, the card issuer shall apply amounts in excess of the minimum payment


amount first to the card balance bearing the highest rate of interest, and then to each
successive balance bearing the next highest rate of interest, until the payment is
exhausted.

A creditor shall allocate the entire amount paid by the consumer in excess of
the minimum payment amount to a balance on which interest is deferred during the
last 2 billing cycles immediately preceding the expiration of the period during which
interest is deferred.

If a card issuer makes a material change in the mailing address, office, or
procedures for handling cardholder payments, and such change causes a material
delay in the crediting of a cardholder payment made during the 60-day period
following the date on which such change took effect, the card issuer may not impose
any late fee or finance charge for a late payment on the credit card account to which
such payment was credited.”

SEC. 17. Standards Applicable to Initial Issuance of Subprime or “Free
Harvester" cards. - If the terms of a credit card account under an open end consumer
credit plan require the payment of any fees (other than any late fee, over-the-limit fee,
or fee for a payment returned for insufficient funds) by the consumer in the first year
during which the account is opened in aggregate amount in excess of 25 percent of the
total amount of credit authorized under the account when the account is opened, no
payment of any fees (other than any late fee, over-the-limit fee, or fee for a payment
returned for insufficient funds) may be made from the credit made available under the
terms of the account.

SEC. 18. Rules regarding Periodic Statements. - The payment due date for a
credit card account under an open end consumer credit plan shall be the same day
each month.

If the payment due date for a credit card account under an open end consumer
credit plan is a day on which the creditor does not receive or accept payments by mail
(including weekends and holidays), the creditor may not treat a payment received on
the next business day as late for any purpose.

SEC. 19. Timing of Payments. — The timing and grace period of payments
shall be as follows:

(a) Time To Make Payments.—A creditor may not treat a payment on
an open end consumer credit plan as late for any purpose, unless the creditor has
adopted reasonable procedures designed to ensure that each periodic statement
including the information required in this Act is mailed or delivered to the consumer
not later than 21 days before the payment due date.

(b) Grace Period.—-If an open end consumer credit plan provides a time period
within 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 with respect to such portion of the credit extended for the billing cycle of
which such period is a part, unless a statement which includes the amount upon which
the finance charge for the period is based was mailed or delivered to the consumer not
later than 21 days before the date specified in the statement by which payment must
be made in order to avoid imposition of that finance charge.”

SEC. 20. Consideration of Ability to Repay. - A card issuer may not open any
card account for any consumer under an open end consumer credit plan, or



increase any credit limit applicable to such account, unless the card issuer considers
the ability of the consumer to make the required payments under the terms of such
account

TITLE IL
ENHANCED CONSUMER DISCLOSURES

SEC. 21. Payoff Timing Disclosures. - The following di
timing shall be clearly provided in credit card statements:

A. A written statement in the following form: “Minimum Payment Warning:
Making only the minimum payment will increase the amount of interest you pay and
the time it takes to repay your balance” or such similar statement as is established by
the BSP pursuant to consumer testing shall be included in billing statements of ail
credit cards.

B. Repayment information that would apply to the outstanding balance of the
consumer under the credit plan, including

1. The number of months (rounded to the nearest month) that it would
take to pay the entire amount of that balance, if the consumer pays only the
required minimum monthly payments and if no further advances are made;

2. The total cost to the consumer, including interest and principal
payments, of paying that balance in full, if the consumer pays only the
required minimum monthly payments and if no further advances are made;

3. The monthly payment amount that would be required for the consumer
to eliminate the outstanding balance in 36 months, if no further advances are
made, and the total cost to the consumer, including interest and principal
payments, of paying that balance in full if the consumer pays the balance over
36 months; and

4. A toll-free telephone number at which the consumer may receive
information about accessing credit counseling and debt management services
C. 1. Subject to B (2), the creditor shall apply the interest rate or rates in
effect on the date on which the disclosure is made until the date on which the
balance would be paid in full.

2. If the interest rate in effect on the date on which the disclosure is
made is a temporary rate that will change under a contractual provision
applying an index or formula for subsequent interest rate adjustment, the
creditor shall apply the interest rate in effect on the date on which the
disclosure is made for as long as that interest rate will apply under that
contractual provision, and then apply an interest rate based on the index or
formula in effect on the applicable billing date.

D. All of the information described in subparagraph (B) shall:

1. Be disclosed in the form and manner which the BSP shall prescribe,
by regulation, and ina manner that avoids duplication; and

2. Be placed in 2 conspicuous and prominent location on the billing
statement.

B. In the regulations prescribed under subparagraph (D), the BSP shall require
that the disclosure of such information shall be in the form of a table that--

1. Contains clear and concise headings for each item of such I
information; and

2. Provides a clear and concise form stating each item of information
required to be disclosed under each such heading.

closures on payoff

10


F, In prescribing the form of the table under subparagraph (E), the BSP shall
require that (i) all of the information in the table, and not just a reference to the table,
be placed on the billing statement, as required by this paragraph; and (ii) the items
required to be included in the table shall be listed in the order in which such items are
set forth in subparagraph (B)..

G. In prescribing the form of the table under subparagraph (D), the BSP shall
employ terminology, which is different than the terminology, which is employed in
subparagraph (B), if such terminology is more easily understood and conveys
substantially the same meaning.

SEC. 22. Creditor Toll-free Number. — Not later than 6 months after the date
of enactment of this Act, the BSP shall issue guidelines, by rule, for the establishment
and maintenance by creditors of a toll-free telephone number for purposes of
providing information about accessing credit counseling and debt management
services, as required under this Act.

SEC, 23. Requirements relating 10 Late Payment Deadlines and Penalties. ~

A. Late payment deadline required to be disclosed. In the case of a credit card
account under an open end consumer credit plan under which a late fee or charge may
be imposed due to the failure of the obligor to make payment on or before the due
date for suich payment, the periodic statement required under subsection B with
respect to the account shall include, in a conspicuous location on the billing statement,
the date on which the payment is due or, if different, the date on which a late payment
fee will be charged, together with the amount of the fee or charge to be imposed if
payment is made after that date.

B. Disclosure of increase in interest rates for late payments. If | or more late
payments under an open end consumer credit plan may result in an increase in the
annual percentage rate applicable to the account, the statement required under
subsection with respect to the account shall include conspicuous notice of such fact,
together with the applicable penalty annual percentage rate, in close proximity to the
disclosure required under subparagraph A of the date on which payment is due under
the terms of the account.

C. Payments at local branches. If the creditor, in the case of a credit card
account referred to in subparagraph A, is a financial institution which maintains
branches or offices at which payments on any such account are accepted from the
obligor in person, the date on which the obligor makes a payment on the account at
such branch or office shall be considered to be the date on which the payment is made
for purposes of determining whether a late fee or charge may be imposed due to the
failure of the obligor to make payment on or before the due date for such payment."

SEC. 24, Internet Posting of Credit Card Agreements, - Each creditor shall
establish and maintain an Internet site on which the creditor shall post the written
agreement between the creditor and the consumer for each credit card account under
an open-end consumer credit plan.

Each creditor shall provide to the BSP, in electronic format, the consumer
credit card agreements that it publishes on its Internet site.

BSP shall establish and maintain on its publicly available Internet site a central
repository of the consumer credit card agreements received from creditors pursuant to
this subsection, and such agreements shall be easily accessible and retrievable by the
public: Provided That, this Section shall not apply to individually negotiated changes

u


to contractual terms, such as individually modified workouts or renegotiations of
amounts owed by a consumer under an open end consumer credit plan.

‘The BSP, in consultation with the other banking agencies may promulgate
regulations to implement this subsection, including specifying the format for posting
the agreements on the Internet sites of creditors and establishing exceptions to
paragraphs (1) and (2), in any case in which the administrative burden outweighs the
benefit of increased transparency, such as where a credit card plan has a de minimis
number of consumer account holders.

SEC. 25. Prevention of Deceptive Marketing of Credit Reports. — A. Any
advertisement for a free credit report in any medium shall prominently disclose in
such advertisement that free credit reports are available under the law. In the case of
an advertisement broadcast by television, the disclosures required under paragraph (1)
shall be included in the audio and visual part of such advertisement. In the case of an
advertisement broadcast by television or radio, the disclosure required under
paragraph (1) shall consist only of the following: “This is not the free credit report
provided for by law.”

B. Not later than 9 months afler the date of enactment of this Act, the
Department of Trade and Industry shall issue a final rule to carry out this Section.
The rule required by this subsection

I. Shall include specific wording to be used in advertisements in
accordance with this section; and

2. For advertisements on the Internet, shall include whether the disclosure
required under this Act shall appear on the advertisement or the website on
which the free credit report is made available.

C. If an advertisement subject to this Act is made public after the 9-month
deadline specified in paragraph (1), but before the rule required by paragraph (1) is
ized, such advertisement shall include the disclosure: “Free credit reports are
available under the law at specific website created by the BSP

TITLE WL
PROTECTION OF YOUNG CONSUMERS

SEC. 26. Extensions of Credit to Underage Consumers. ~ A) No credit card
may be issued to, or open end consumer credit plan established by or on behalf of, a
consumer who has not attained the age of 21, unless the consumer has submitted a
written application to the card issuer that meets the requirements of subparagraph (B)

(B) Application requirements. An application to open a credit card account by
a consumer who has not attained the age of 21 as of the date of submission of the
application shall require (i) the signature of a cosigner, including the parent, legal
guardian, spouse, or any other individual who has attained the age of 21 having a
means to repay debts incurred by the consumer in connection with the accounts
indicating joint liability for debts incurred by the consumer in connection with the
account before the consumer has attained the age of 21; or (ii) submission by the
consumer of financial information, including through an application, indicating an
independent means of repaying any obligation arising from the proposed extension of
credit in connection with the account.

(©) The BSP shall promulgate regulations providing standards that, if met,
would satisfy the requirements of subparagraph (B)(ii).

12


SEC. 27. Protection of Young Consumers from Pre-Screened Credit Offers

If the consumer report does not contain a date of birth that shows that the consumer
has not attained the age of 21, or, if the date of birth on the consumer report shows
that the consumer has not attained the age of 21, such consumer consents to the
consumer-reporting agency to such furnishing.

SEC. 28. Parental Approval Required To Increase Credit Lines for Accounts
for Which Parent Is Jointly Liable. - No increase may be made in the amount of credit
authorized to be extended under a credit card account for which a parent, legal
guardian, or spouse of the consumer, or any other individual has assumed joint
liability for debts incurred by the consumer in connection with the account before the
consumer attains the age of 21, unless that parent, guardian, or spouse approves in
writing, and assumes joint liability for, such increase.

SEC. 29. Privacy Protections for College Students. - An institution of higher
education shall publicly disclose any contract or other agreement made with a card
issuer or creditor for the purpose of marketing a credit card. No card issuer or creditor

may offer to a student at an institution of higher education any tangible item to induce
such student to apply for or participate in an open end consumer credit plan offered by
such card issuer or creditor, if such offer is made A) on the campus of an institution of
higher education; B) near the campus of an institution of higher education, as
determined by rule of the BSP; or C) at an event sponsored by or related to an
institution of higher education.

SEC. 30. Sense of the Congress. - It is the sense of the Congress that each
institution of higher education should consider adopting the following policies
relating to credit cards:

(A) That a

such institution n
will take place.

**(B) That the number of locations on the campus of such institution at
which the marketing of credit cards takes place be limited

**(C) That credit card and debt education and counseling sessions be
offered as a regular part of any orientation program for new students of such
institution."

y card issuer that markets a credit card on the campus of
y the institution of the location at which such marketing

SEC. 31. Reports by Creditors. - A. Each creditor shall submit an annual
report to the BSP containing the terms and conditions of all business, marketing, and
promotional agreements and college affinity card agreements with an institution of
higher education, or an alumni organization or foundation affiliated with or related to
such institution, with respect to any college student credit card issued to a college
student at such institution.
B. The information required to be reported under subparagraph (A) includes
(j) any memorandum of understanding between or among a creditor, an
institution of higher education, an alumni association, or foundation that
directly or indirectly relates to any aspect of any agreement referred to in such
subparagraph or controls or directs any obligations or distribution of benefits
between or among any such entities;
(i) the amount of any payments from the creditor to the institution,

2B


organization, or foundation during the period covered by the report, and the
precise terms of any agreement under which such amounts are determined;
and
(iii) the number of credit card accounts covered by any such agreement
that were opened during the period covered by the report, and the total number
of credit card accounts covered by the agreement that were outstanding at the
end of such period.

C, The information required to be reported under subparagraph (A) shall be
aggregated with respect {o each institution of higher education or alumni organization
or foundation affiliated with or related to such institution.

D. The initial report required under subparagraph (A) shall be submitted to
the BSP before the end of the 9-month period beginning on the date of enactment of
this subsection,

SEC, 32. Mandatory Reports to Congress. - The BSP shall submit to the
Congress, and make available to the public, an annual report that lists the information
concerning credit card agreements submitted to the BSP under paragraph (2) by each
institution of higher education, alumni organization, or foundation.

‘The Commission on Audit, hereinafter referred to as COA shall, from time to
time, review the reports submitted by creditors under this Act and the marketing
practices of creditors to determine the impact that college affinity card agreements
and college student card agreements have on credit card debt.

Upon completion of any study under this Section, the COA shall periodically
submit a report to the Congress on the findings and conclusions of the study, together
with such recommendations for administrative or legislative action as the COA
determines to be appropriate,

TITLE IV
GIFT CARDS.

SEC. 33. Prohibition on Imposition of Fees or Charges. - Except as provided
under paragraphs (2) through (4), it shall be unlawful for any person to impose a
dormancy fee, an inactivity charge or fee, or a service fee with respect to a gift
certificate, store gift card, or general-use prepaid card: Provided That, a dormancy
fee, inactivity charge or fee, or service fee may be charged with respect to a gift
certificate, store gift card, or general-use prepaid card, if: (A) there has been no
activity with respect to the certificate or card in the 12-month period ending on the
date on which the charge or fee is imposed;
(B) the disclosure requirements of paragraph (3) have been met;
(C) not more than one fee may be charged in any given month; and
(D) any additional requirements that the BSP may establish through
rulemaking under subsection (d) have been met.

SEC. 34, Disclosure Requirements Met. - The disclosure requirements of this,
Section are met if :
A. The gift certificate, store gi
conspicuously states-
1. That a dormancy fee, inactivity charge or fee, or service fee may
be charged;

card, or general-use prepaid card clearly and

14


2. The amount of such fee or charge;
3. How often such fee or charge may be assessed; and
4. That such fee or charge may be assessed for inactivity; and
B. The issuer or vendor of such certificate or card informs the purchaser of
such charge or fee before such certificate or card is purchased, regardless of whether
the certificate or card is purchased in person, over the Internet, or by telephone.
C. The prohibition under paragraph A shall not apply to any gift certificate:
1. That is distributed pursuant to an award, loyalty, or promotional
program, as defined by the BSP; and
2. With respect to which, there is no money or other value exchanged.

SEC.35. Prohibition on Sale of Gift Cards With Expiration Dates.- shall be
unlawful for any person to sell or issue a gift certificate, store gift card, or general-use
prepaid card that is subject to an expiration date; except when a gift certificate, store
gift card, or general-use prepaid card may contain an expiration date if a) The
expiration date is not earlier than 5 years after the date on which the gift certificate
was issued, or the date on which card funds were last loaded to a store gifi card or
general-use prepaid card; and b) The terms of expiration are clearly and
conspicuously stated.

The BSP shall prescribe regulations to carry out this section, in addition to any
other rules or regulations required by this title, including such additional requirements
as appropriate relating to the amount of dormancy fees, inactivity charges or fees, or
service fees that may be assessed and the amount of remaining value of a gift
certificate, store gift card, or general-use prepaid card below which such charges or
fees may be assessed.

TITLE V
MISCELLANEOUS PROVISIONS

SEC. 36. Study and Report on Interchange Fees. ~ The COA shall conduct a
study on use of credit by consumers, interchange fees, and their effects on consumers
and merchants. In conducting the study required by this Section, COA shall review:

A. The extent to which interchange fees are required to be disclosed to
consumers and merchants, whether merchants are restricted from disclosing
interchange or merchant discount fees, and how such fees are overscen by the BSP.

B. The ways in which the interchange system affects the ability of merchants
of varying size to negotiate pricing with card associations and banks;

C. The costs and factors incorporated into interchange fees, such as
advertising, bonus miles, and rewards, how such costs and factors vary among cards;

D. The consequences of the undisclosed nature of interchange fees on
merchants and consumers with regard to prices charged for goods and services;

E. How merchant discount fees compare to the credit losses and other costs
that merchants incur to operate their own credit networks or store cards;

F. The extent to which the rules of payment card networks and their policies
regarding interchange fees are accessible to merchants;

G. Other jurisdictions where the central bank has regulated interchange fees
and the impact on retail prices to consumers in such jurisdictions;

H. Whether and to what extent merchants are permitted to discount for cash;

and


1. The extent to which interchange fees allow smaller financial institutions and
credit unions to offer payment cards and compete against larger financial institutions.

SEC. 37. Report Required--Not later than 180 days after the date of
enactment of this Act, BSP and COA shall submit a report to the Committee on
Banks, Financial Institutions and Currencies of the Senate and the Committee on
Banks and Financial Intermediaries of the House of Representatives containing a
detailed summary of the findings and conclusions of the study required by Section 35,
together with such recommendations for legislative or administrative actions as may
be appropriate.

SEC. 38. BSP Review of Consumer Credit Plans and Regulations. ~ Not later
than 2 years after the effective date of this Act and every 2 years thereafter, the BSP
shall conduct a review, within the limits of its existing resources available for
reporting purposes, of the consumer credit card market, including: a) the terms of
credit card agreements and the practices of credit card issuers; b) the effectiveness of
disclosure of terms, fees, and other expenses of credit card plans; c) the adequacy of
protections against unfair or deceptive acts or practices relating to credit card plans;
and d) whether or not, and to what extent, the implementation of this Act and the
amendments made by this Act has affected: (1) cost and availability of credit,
particularly with respect to non-prime borrowers; (2) the safety and soundness of
credit card issuers; (3) the use of risk-based pricing; or (4) credit card product
innovation

SEC. 39. Mandatory Open Consultation with the Public. - In connection with
conducting the review required by subsection (a), the BSP shall solicit comment from
consumers, credit card issuers, and other interested parties, such as through hearings
or written comments.

‘The BSP shall publish a notice in the Official Gazette that a) summarizes the
review, the comments received from the public solicitation, and other evidence
gathered by the BSP, such as through consumer testing or other research; and b)
either:

( proposes new or revised regulations or interpretations to update or
revise disclosures and protections for consumer credit cards, as appropriate; or

(ii) states the reason for the determination of the BSP that new or
revised regulations are not necessary.

SEC. 40. Revision of review period following material revision of
regulations.-In the event that the BSP materially revises regulations on consumer
credit card plans, a review need not be conducted until 2 years afier the effective date
of the revised regulations, which thereafter shall be treated as the new date for the
biennial review required under Section 38.

SEC. 41. BSP Report to the Congress.—The BSP shall report to Congress not
less frequently than every 2 years, except as provided in subsection (c)(2), on the
status of its most recent review, its efforts to address any issues identified from the
review, and any recommendations for legislation.

SEC. 42. Report to Congress on Reductions of Consumer Credit Card Limits
Based on certain information as to Experience and Transactions of the Consumer:

16


Before the end of the 1-year period beginning on the date of enactment of this Act, the
BSP, in consultation with concemed stakeholders, shall submit a report to the
Committee on Banks and Financial Intermediaries of the House of Representatives
and the Committee on Banking, Financial Institutions and Currencies of the Senate on
the extent to which, during the 3-year period ending on such date of enactment,
creditors have reduced credit limits or raised interest rates applicable to credit card
accounts under open end consumer credit plans based on:

A. The geographic location where a credit transaction with the consumer took
place, or the identity of the merchant involved in the transaction;

B. The credit transactions of the consumer, including the type of credit
transaction, the type of items purchased in such transaction, the price of items
purchased in such transaction, any change in the type or price of items purchased in
such transactions, and other data pertaining to the use of such credit card account by
the consumer; and

C. The identity of the mortgage creditor, which extended or holds the
mortgage loan secured by the primary residence of the consumer.

The report required under subsection A shall also include: (1) the number of
creditors that have engaged in the practices described in subsection (a); (2) the extent
to which the practices described in subsection (a) have an adverse impact on minority
or low-income consumers (3) any other relevant information regarding such practices;
at (4) recommendations to the Congress on any regulatory or statutory changes that
may be needed to restrict or prevent such practices.

SEC. 43. BSP Review of Small Business Credit Plan and Recommendations. -
Not later than 9 months after the date of enactment of this Act, the BSP shall conduct
a review of the use of credit cards by businesses with not more than 50 employees (in
this scotion referred to as “'small businesses") and the credit card market for small
businesses, including:
A. The terms of credit card agreements for small businesses and
the practices of credit card issuers relating to small businesses;
B. The adequacy of disclosures of terms, fees, and other expenses
of credit card plans for small businesses;
C. The adequacy of protections against unfair or deceptive acts or
practices relating to credit card plans for small businesses;
D. The cost and availability of credit for small businesses,
particularly with respect to non-prime borrowers;
E. The use of risk-based pricing for small businesses;
F. Credit card product innovation relating to small businesses; and
G. The extent to which small business owners use personal credit
cards to fund their business operations.

SEC. 44. Financial and Economic Literacy Education Program. ~ Not later
than 9 months after the date of enactment of this Act, the Secretary of Education,
Secretary of Trade and Industry, Secretary of Finance and the BSP, together with the
Credit Information Corporation created under Republic Act No. 9510, hereinafter
referred to as CIC, shall coordinate:
A. to evaluate and compile a comprehensive summary of all existing
financial and economic literacy education programs, as of the time of the
report; and

wv


B. to prepare and submit a report to Congress on the findings of the
evaluations.

SEC. 46. Contents of the Report to Congress. - The report required by Section
43 of this Act shall address, at a minimum: A. Such recommendations of the Office of
the President on Financial Literacy; B. existing financial and economic literacy
education programs for grades kindergarten through high school, and annual funding
to support these programs; C. existing postsecondary financial and economic literacy
education programs and annual funding to support these programs; D. the current
financial and economic literacy education needs of OFWs, adults, and in particular,
low- and moderate-income adults; E. ways to incorporate and disseminate best
practices and high quality curricula in financial and economic literacy education; and
F. specific recommendations on sources of revenue to support financial and economic
literacy education activities with a specific analysis of the potential use of eredit card
tral tion fees.

SEC. 47. Improving and Expanding Financial and Economic Literacy
Education, - Strategic Plan. - The Secretary of Education, Secretary of Finance and
the Bureau of Treasury shall coordinate with the BSP and the CIC to develop a
strategic plan to improve and expand financial and economic literacy education.

The contents of the plan shall include, among others, findings from the report
and evaluations of existing financial and economic literacy education programs and
include proposals to improve, expand, and support financial and economic literacy
education based on the findings of the report and evaluations.

The plan developed under Section shall be presented to Congress not later
than 6 months after the date on which the report under Section 43 A_ is submitted to
Congress.

SEC. 48. Implementing Rules and Regulations ~ The Secretary of Agriculture,
in collaboration with the Secretary of Trade and Industry shall promulgate such rules
and regulations as may be necessary to implement the provision of this Act within
sixty (60) days after approval of this Act.

SEC. 49, Repealing Clause ~ All laws, decrees or executive issuances and any
rules and regulations or any part thereof that may be inconsistent with any of the
provisions of this Act are hereby deemed repealed, amended or modifies accordingly.

SEC. 50. Effectivity - This Act shall take effect fifteen (15) days after its
complete publication in two (2) newspapers of general circulation.

Approved,

18