HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
‘Second, Regular Session

67

HOUSE BILL NO, __—

Introduced by Rep. Winston "Winnie" Castelo
EXPLANATORY NOTE

In a study, it was thus revealed that there is an increasing and un-regulated rate of
delinquency in the credit card system in the Philippines by credit card holders on the one hand
and bankruptcies, bailouts, and take-overs by merchant establishments and banks on the other
that would tend to lead to a crisis akin with the 2008 financial crisis at a global scale.

The determinants of this experience are as follows, namely: “1) liberal issuance of
credit cards to those without steady income, loose issuance of credit cards to defaulting
cardholders, and extension of credit limits to entice cardholders to further spend beyond their
means; 2) ' household and individual characteristics and propensities to consume beyond their
means as a way of making ends meet, and, 3) increasing consumerist culture in the developed
World and urban centers of the developing world.”

Hence, there is now a need for proper and effective legislation of a ‘credit reform bill and
the timeliness of awareness-raising and grass advocacy for the proper implementation of these
policies’ (See-San Juan, 2011). In fact, since credit cards have now substituted for cash in an
era marked by the dominance of a consumption-led global market economy, not few financial
‘experts and commentators fear a bubble burst in the credit card industry that could potentially
aggravate the current global situation, not the least at the national front.

It cannot be gainsaid that there is now an alarming and ever increasing number of
clueless credit card users lured into this scheme of things who make improvident acquisitions
through the card but in the process become poor and clueless victims of compounded interest
charges and hefty penalties imposed over and above their outstanding balance, hence they
need adequate protection consistent with the adage that ‘those who have less in life should
have more in law’.

It should be viewed as quite unconscionable being literally punished with 3.5% monthly
(compounded) interest rate on outstanding balance and effectively an annualized interest rate of
51.11%, And there are about 2 million plus people badly affected by ntty's credit
system.

2


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

‘SIXTEENTH CONGRESS
Second Regular Session

4667

HOUSE BILL NO.

Introduced by Rep. Winston “Winnie’ stelo

AN ACT
INSTITUTIONALIZING AWARENESS AND GRASSROOT ADVOCACY AND
TIGHTENING THE ISSUANCE OF CREDIT CARDS THEREBY AVERTING
DELINQUENCY ON THE PART OF THE CREDIT CARD HOLDERS AND
BANKRUPTCY ON THE PART OF THE BANKS AND OTHER PARTIES
INVOLVED IN THE CREDIT CARD SYSTEM AND FOR OTHER PURPOSES

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

SECTION 1. This Act shall be known as the “Credit Reform Act of 2014”.

SEC. 2. There shall be institutionalized public awareness on the part of credit card
holders and on the part of other parties involved in the credit card system (i.e. merchant
establishments, banks) toward strengthening implementation of bank and credit-related laws
and policies in the Philippines.

SEC. 3. For adequate protection of credit card holders in a delinquency case, the
interest rates imposed by credit card companies on purchases and cash advances made
through such facility shall in no case be higher than 1% percent per month and 12% per annum
without compounding.

SEC. 4. Surcharges or interests shall likewise be limited to a ceiling of 1% per month
without compounding,

SEC. 5. No other costs shall be enforced other than the foregoing delinquency case
except for reasonable attorney's fees and expenses completely disclosed to, sufficiently
understood by and voluntarily agreed with by an applicant for credit facility.

SEC. 6. Sanctions. Any creditor who in connection with any credit transaction fails to
disclose to any person any information in violation of this Act or any regulation issued
thereunder shall be liable to such person in the amount of P5,000 or imprisonment of not less
than 6 months.

Action to recover such penalty or invoke punishment may be brought by such person
within one year from the date of the occurrence of the violation, in any court of competent


jurisdiction. The creditor shall be liable for reasonable attorney's fees and court costs as
determined by the court,

SEC. 7. To effectively implement the intent of this Act, the Bangko Sentral ng Pilipinas
is hereby tasked to overseer closely the credit card system in the Philippines and effect relevant
and immediate strategies or schemes that are mutually beneficial to the general public and the
credit card industry.

SEC. 8. This Act shall take effect thirty (30) days upon its approval and publication in at
least three (3) newspapers of general circulation.

Approved,