HOUSE OF REPRESENTATIVES
Republic of the Philippines RECEIVED
HOUSE OF REPRESENTATIVES

Quezon City

Seventeenth Congress
First Regular Session

2455

PresmPATON UNTT

House Bill No.

Introduced by HON. MA. THERESA V. COLLANTES

EXPLANATORY NOTE

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

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

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

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

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

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

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

Ad MA. THERESA V, COLLANTES


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Seventeenth Congress
Fist Regular sign

Jo
House Bill No.

Introduced by HON. MA. THERESA V. COLLANTES

AN ACT.
TO REGULATE THE PHILIPPINE CREDIT CARD INDUSTRY

Article 1. Short
Regulation Law”.

le — This Act shall be known as the “Philippine Credit Card Industry

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

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

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

Supervision shall include the following:

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

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

c. Overseeing to ascertain the laws and regulations are complied with.
Article 5. Definition of Terms —
a, Accelaration clause — any provision in the contract between the credit card issuer

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


b. Annual membership fees — amount a credit card issuer levies for the right to use
its card and acquire access to other membership benefits.

¢. Acquirer - shall refer to the institution that accepts and facilitates the processing
of the credit card transaction which is initially accepted by the merchant;

d. Balance transfer — transfer of balance in a credit card account to another credit
card account.

€. Billing cycle/billing period — period of time between billings. Billing cycles shall
be at least fifteen (15) days.

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

g. Cash Advance - an cash obtained from the credit card account on any manner
availed by the cardholder.

h. Credit Card — any card or other credit device intended for the purpose of

obtaining money, property, or services on credit.

i, Credit card issuer ~ is a bank or corporation that offers the use of its credit card.

j. Credit card limit - the maximum total amount for purchases, cash advances,
balance transfer, and finance charges, service fees, penalties and other charges which can be
charged to the credit card.

k, Default or delinquency — non-payment of, or payment of any amount less than,
the Minimum Amount Due, Minimum Payment Required, or words of similar import for at
least two (2) billing cycles;

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

m, Installment purchases — transactions wherein payment for is amortized in parts
over a fixed period.

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

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

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

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


(iii) any amount in excess of the credit line; and
(iv) all past due amounts, if any

p. Outstanding balance — the amount to be repaid at any point in time
q. Statement cut-off date - the end date of a billing cycle as determined by the

credit card issuer, when account activities (purchases, payments, charges) during the billing
cycle are summaried.

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

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

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

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

Article 8. Service legal agreement ~ there shall be in the service level agreement between
the acquiring banks and their partner merchants, a provision requiring merchants to perform
due diligence to establish the identity of the cardholders.

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

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

Article 10, Infomration to be Disclosed — Credit card issuer shall disclose to all credit
cardholders and potential credit cardholders the following information:

a, Finance charge for unpaid amounts after payment due date;


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

c. The default, late payment/penalty fees or similar delinquency-related charges
payable in event of late payments: Provided, that the late payment or penalty fees shall be
based on the unpaid minimum amount due or a prescribed minimum fixed amount: Provided,
further, that said late payment or penalty fees maybe base on the total outstanding balance of
the credit card obligation, including amounts payable under installment terms or deferred
payment schemes, if the contract between the issuer and the cardholders contained an
“acceleration clause” and the total outstanding balance of the credit card is classified and
report as past due;

d. The method of determining the amount of interest and/or delinquency charges
maybe imposed;

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

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

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

h, A reminder to the cardholder in the billing statement, or its equivalent document,
that payment of any the minimum amount due or any amount less that the total amount due
for the billing cycle/period would mean the imposition of interest and/or other charges. A
written statement in the following form must be printed in the monthly billing statement —
“Important Reminder: Paying less than the total amount due will increase the amount of
interest you pay and the time it takes to repay your balance”: and

i, Any other information that maybe required by the BSP. The credit card issue shall
endeavor to convey said information in a manner that is understandable by the credit card
holder: Provided, that the items enumerated above may be included quarterly at the
minimum, in the billing statement in a table format.

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

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

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

Article 12. Over-limit-transaction — if a cardholder breaches his credit limit by a new
transaction, the subject transaction may be processed subject to the discretion of the credit



card issuer: Provided, that no over the limit fee shall be charged unless the cardholder
provides expressed consent to be charged the over the limit fee or unless that account remai
to be over the limit on the account’s next statement date: Provided, further, that such fees are
clearly and prominently disclosed in the table of fees and charges.

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

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

a, Disclosure of information is with the consent of the cardholder;

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

¢. Upon Orders of Court of competent jurisdiction or any government office or
agency authorized by law, or under such conditions as may be prescribed by the Monetary
Board of the BSP;

d, Disclosure to third party service providers solely for the purpose of assisting or
rendering services to the credit card issuer and for recovery purposes or to enforce its rights
against the cardholder.

e. Disclosure to third parties such as insurance companies, solely for the purpose of
insuring the credit card issuer from cardholder default or other credit loss, and the cardholder
from fraud or unauthorized charges, and,

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

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

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

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

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

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


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

Article 19, Endorsement of Credit Card Debt collection by Credit Card Issuer to a
Collection Agency — A credit card issuer shall inform its cardholder in writing of the
endorsement of the collection of the account to a collection agency, or the endorsement of the
account form one collection agency to another, prior to the actual endorsement. The
notification shall include the full name of the collection agency and its contact details:
Provided, that the required notification in writing shall be included in the terms and
conditions of the credit card agreement: Provided further, that the credit card issuer shall
refer the collection of an account to only one collection agency.

Article 20. Communication in connection with debt collection - The credit card issuer or
its collection agency may communicate with a credit cardholder in connection with the
collection of any debt through the mode prescribed within guidelines provided by the BSP.

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

Article 22, Application of Card Payments — Upon receipt of a payment from a cardholder
who has account that carry different interest rates for different types of purchases (i.e. cash
advances, regular purchases, balance transfer, deferred payments purchases in 0% interest,
etc.), the credit card issuer shall apply amounts in excess of the minimum payment amount
first to the fees and charges, and then to the billed balance be: i
followed by the billed balance bearing the next higher of interest, until the payment is
exhausted. Provided, that the original rates for promotional offers hall be the basis for
determining hierarchy of payment.

Article 23. Termination of account ~ A cardholder may cancel or terminate his account
anytime: Provided, that the cardholder either pays in full outstanding balance or enters into
another agreement for repayment of outstanding balance whether one-time or on installments
within a fixed period of time; Provided further, that repayment in installment shall not be
generally subject to interest unless there is a violation of the new agreement.

Article 24, Violation of this Act and Other Related Rules, Regulations, Orders or
Instructions — Whenever any person willfully violates any provision of this law or any
related rules, regulations, orders or instructions, issued by the Monetary Board, the person or
persons responsible for such violation shall be punished by imprisonment of not less than two
(2) years nor more than ten (1) years or by a fine of not less than Fifty Thousand Pesos (Php
50,000.00) nor more than two hundred thousand pesos (Php 200,000.00) or both, at the
discretion of the court.

Article 25, Administrative Sanction On Credit Card — The provision of Section 37 of
Republic Act No. 7653 shall be made applicable to any credit card issuer, acquiring bank,
their directors and offers, including, but not limited to, the administrative sanctions that may


be imposed, without prejudice to the criminal sanctions against the culpable person provided
in Article 24, for any will full violation of this law or any regulated rules, regulations, orders
or instructions issued by the Monetary Board: Provided, that in addition to the administrative
sanctions that may be imposed, the authority of the credit card issuer may be suspended or
cancelled by the BSP.

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

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

Approved.