Republic of the Philippines
House of Representatives
Quezon City
Thirteenth Congress
First Regular Session

HOUSE BILLNO.__121

Introduced by Representative JOEY SARTE SALCEDA

EXPLANATORY NOTE

It is the policy of the state to protect the interests of the consumers, promote their general
welfare and establish standards of conduct for business and industry, and further protect consumers
against deceptive, unfair and unconscionable sales acts and practices.

As consumers become sophisticated in their choices, the demand for products and services that
address their particular needs also increases, For credit card companies, this would mean offering
plastic cards that go beyond the ordinary commodity. With an aggressive marketing strategy,
acceptance of the credit card as a replacement for cash is starting to become a reality. In the last three
years, credit card billings posted a strong growth of 19% from P100bn in 2000, P118bn in 2001, and
P132bn in 2002 to 141.5bn in the Jast quarter of 2003, which Jed companies to develop and launch a
variety of innovative features that cater to various consumer needs.

Despite the broad enrollment in the credit card business from 2.6mn credit cards issued in 1999
to 3.1mn in 2000, 3.6mn in 2001 to 2002 and 4mn in 2003 or a slight increase of 8% per year, the
credit card business, which started in 1957, has not come under review, amidst continuing complaints
of double charging, unconscionable interest, surmounting penalties, finance and other charges.

Thus, there is an overriding necessity that the issuance of credit cards be reviewed and
necessary consumer protection be made for the interest of the consumers.

From the foregoing reasons, immediate approval of this bill is earnestl



Republic of the Philippines
House of Representatives
Quezon City
Thirteenth Congress

First Regular Session

House Bill No.__@122

Introduced by Representative JOEY SARTE SALCEDA

AN ACT
PROVIDING FOR PROTECTION TO CONSUMERS IN THEIR
CREDIT CARD TRANSACTIONS,

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

SECTION 1. Short Title. - This Act shali be known as the “Credit Card Consumer Protection
Act of 2004.”

SEC. 2. Declaration of Policy. ~ It is hereby declared to be the policy of the State to promote
the effective operation of the free market and protect consumers from deceptive price increases for
goods and services by prohibiting unfair credit card surcharges and encouraging the availability of
discounts by those retailers who wish to offer a lower price for goods and services purchased through
the use of credit cards.

SEC. 3. Definition of Terms. — As used in this Act, the following definitions shall apply:

(a) “Credit card” means any card, plate, coupon book, or other single credit device existing for
the purpose of being used from time to time upon presentation to obtain money, property,
labor, or services on credit.

(b) “Accepted credit card” means any credit card which the cardholder has requested or
applied for and received or has signed, or has used, or has authorized another person to use,
for the purpose of obtaining money, property, labor, or services on credit. Any credit card



issued in renewal of, or in substitution for, an accepted credit card when received by the
cardholder, whether the credit card is issued by the same or a successor card issuer.

(©) “Card issuer” means any person who issues a credit card or the agent of that person for that
purpose with respect to the credit card.

(d) “Cardholder” means a natural person to whom a credit card is issued for consumer credit
purposes, or @ natural person who has agreed with the card issuer to pay consumer credit
obligations arising from the issuance of a credit to another natural person.

(© “Property” includes money, goods, services, or anything of value.

© “Retailer” means every person other than a card issuer who furnishes money, goods,
services, or anything else of value upon presentation of a credit card by a cardholder.

(g) “Unauthorized use” means the use of a credit card by a person, other than the cardholder,
(1) who does not have actual, implied, or apparent authority for that use and (2) from which
the cardholder receives no benefit. “Unauthorized use” does not include the use of credit
card by a person who has been given authority by the cardholder to use the credit card. Any
attempted termination by the cardholder of the person’s authority is ineffective as against
the card issuer until such time as the cardholder complies with such procedures as may be
required the card issuer to terminate that authority. Notwithstanding the above, following
the card issuer’s receipt of oral or written notice from a cardholder indicating that it wishes
to terminate the authority of a previously authorized user of a credit card, the card issuer
shall follow its usual procedures for precluding any further use of a credit card by an
unauthorized person.

(h) An “inquiry” is writing that is posted by mait to the address of the card issuer to which
payments are normally tendered, unless another address is specifically indicated on the
statement for that purpose, then to that other address, and that is received by the card issuer
no later than 60 days after the card issuer transmitted the first periodic statement that
reflects the alleged billing error, and that does all of the following:

(1) Sets forth sufficient information to enable the card issuer to identify the cardholder and
the account.

(2) Sufficiently identifies the billing error.

(3) Sets forth information providing the basis for the cardholder’s belief that the billing
error exists.

@

A “response” is a writing, which is responsive to an inquiry and mailed to the cardholder’s
address last known to the card issuer.



@ A “timely response” is a response, which is mailed within two complete billing cycles, but
in no event later than 90 days, after the card issuer receives inquiry.

(&) A “billing error” means an error by omission or commission in (1) posting any debit or
credit, or (2) in computation or similar error of an accounting nature contained in a
statement given to the cardholder by the card issuer,

() “Adequate notice” means a printed notice to a cardholder which sets forth the pertinent
facts clearly and conspicuously so that a person against whom it is operated could
reasonably be expected to have noticed it and understood its meaning.

(m)“Seoured credit card” means any credit card issued under an agreement or another
instrument, which pledges, hypothecates, or places a lien on real property or money or
other personal property to secure the cardholder’s obligations to the card issuer.

SEC. 4. Credit Card Issuance. — No credit card shall be issued except in response to an oral or
written request or application therefore; or as in substitution for, an accepted credit card whether such
card is issued by the same or a successor card issuer.

A credit card issuer that mails an offer or solicitation to receive a credit card and, in response,
receives a completed application for a credit card hat lists an address that is different from the address
on the offer or solicitation shall verify the change of address by contacting the person to whom the
solicitation or offer was mailed.

Notwithstanding any other provision of law, a person to whom an offer or solicitation to
receive a credit card is made shall not be liable for the unauthorized use of a credit card issued in
Fesponse to that offer or solicitation if the credit card issuer does not verify the change of address prior
to the issuance of the credit card, unless the credit card issuer proves that this person actually incurred
the change on the credit card,

‘When a credit card issuer receives a written or oral request for a change of the cardholder's
billing address and then receives a written or oral request for an additional credit card within ten (10)
days after the requested address change, the credit card issuer shall not mail the requested additional
credit card, unless the credit card issuer has verified the change of address.

SEC. 5. Unauthorized Use of Credit Card. — A cardholder shall be liable for the unauthorized
use of a credit card only if all of the following conditions are met:

(a) The card is an accepted credit card.

(b) The liability is not in excess of two thousand pesos (P2,000.00)

3



(©) The card issuer gives adequate notice to the cardholder of the potential liability

(d) The card issuer has provided the cardholder with a description of a means by which the
card issuer may be notified of loss, theft or otherwise.

(€) The unauthorized use occurs before the card issuer has been notified that an unauthorized
use of the credit card has occurred or may result of loss, theft or otherwise.

(f) The card issuer has provided a method whereby the user of such card can be identified as
the person authorized to use it.

SEC. 6. Timely Response. — If a card issuer fails to give a timely response to an inquiry of a
cardholder concerning any debit or credit applicable to an obligation incurred through the use of a
credit card, he shall not be entitled to interests, finance charges, service charges or any other charges
thereon, from the date of mailing of the inquiry to date of mailing of the response.

SEC. 7. Billing Errors of Card Issuer.
by the card issuer within two (2) complete billing cycles, but in no event later than ninety (90) days,

Every card issuer shall correct any billing error made

after receiving an inquiry.

Any card issuer who fails to correct a billing error made by the card issuer within the period
prescribed under Section 4 of this Act shall be entitled to the amount by which the outstanding balance
of the cardholder's account is greater than the correct balance, nor any interests, finance charges,
service charges or other charges on the obligation giving rise to the billing error.

‘Any cardholder who is injured by a willful violation of this section may bring an action for the
recovery damages. Judgment may be entered for three (3) times the amount at which actual damages
are assessed. The cardholder shal! be entitled to recover reasonable attomey's fees and costs incurred
in the action.

SEC. 8. Billing Errors of Retailers. - Every retailer shall correct any billing error made by the
retailer within sixty (60) days from the date on which an inquiry concerning s billing error was mailed.

Any retailer who fails to correct a billing error made by the retailer within period prescribed
shall be liable to the cardholder in the amount by which the outstanding balance of the cardholder's
account is greater than the correct balance, and any interests, finance charges, service charges or other
charges on the obligation giving rise to the billing error.

Any cardholder who is injured by a willful violation of this section may bring an action for the
recovery of damages. Judgment may be entered for three (3) times the amount at which actual

4



damages are assessed. The cardholder shall be entitled to recover reasonable attorney's fees and costs
incurred in the action.

SEC. 9. Non-Liability for Billing Errors. — A card issuer shall not be liable for a billing error
made by the retailer. A retailer shall not be liable for an error made by a card issuer.

SEC. 10. Credit Information. ~ No card issuer shall knowingly give any untrue credit
information to any person concerning a cardholder.

No card issuer, after receiving an inquiry from a cardholder regarding a billing error and prior
to satisfying the requirements of Section 7, shall communicate unfavorable credit information
concerning the cardholder to any person solely because of the cardholder's failure to pay the amount
by which the outstanding balance of the cardholder's account is greater than the correct balance.

No card issuer shall cancel or refuse to renew a credit card for the reason that the cardholder
has obtained relief under Section 7 of this Act.

SEC. 11. Credit Card Cancellation. — Unless requested by the cardholder, no card issuer shall
cancel a credit card without having first given the cardholder thirty (30) days’ written notice of its
intention to do so unless the cardholder is or has been within the last ninety (90) days in default of
payment or otherwise in violation of any provision of the agreement between the card issuer and the
cardholder governing the cardholder's use of the credit card or unless the card issuer has evidence or
reasonable belief that the cardholder is unable or unwilling to repay obligations incurred under the
agreement or that an unauthorized use of the card may be made.

Nothing provided herein shall be constructed to prohibit a card issuer from placing the account
of a cardholder on inactive status if the cardholder has not used the card for a period in excess of
eighteen (18) months or from requiring that the cardholder, upon subsequent reuse of a card, provide
to the card issuer such updated information as will enable the card issuer to verify the current credit
worthiness of the cardholder.

SEC. 12. Price Discounts. — Any provision in a contract between a card issuer and a retailer
which has the effect of prohibiting the retailer from offering price discounts or from charging a
different and lower price to a customer who pay for goods or services by cash instead of by credit card
is contrary to public policy and void.



SEC. 13. Repeating Clause. — All laws, decrees, orders, rules and regulations and all other
issuance or parts thereof inconsistent with the provisions of this Act are hereby repealed or amended
accordingly.

SEC. 14. Separability Clause. — If any part or provision of this Act is held unconstitutional or
invalid, other parts or provisions hereof which are not affected thereby shall remain in full force and

effect.

SEC. 15. Effectivity Clause. — This Act shall take effect immediately upon publication in the
Official Gazette or in at least two (2) national newspapers of general circulation.

Approved,