Press Release
April 23, 2009

Loren wants predatory credit card practices stopped

Senator Loren Legarda slammed today the deceptive practices employed by some, if not most, credit card companies operating in the country, including the collection of exorbitant or unreasonable punitive interest rates and unjustifiable fees from credit card holders.

"There is already an uproar in the United States on the predatory lending practices of credit card firms, leading US President Barack Obama to meet with the heads of credit card firms and to call for their stricter regulation by government," said Loren.

"A similar move should be made in the Philippines because I am certain that local credit card holders are in the same sinking boat as their American counterparts, although they may just be suffering in silence," she added.

A research by a national daily put the estimated number of credit card holders in the Philippines at 5.5 million in 2007 from just 2 million to 2.5 million in 1997. In 2005, the total worth of credit card transactions in the Philippines was pegged at P200 billion.

Loren said that the common complaints against credit card issuers are their arbitrary rate increases contained in the fine print of credit card contracts, as well as their use of burly collection agents to follow up payments.

"These collection agents are notorious for their bullying tactics that include harassing calls during the night and at the place of work of credit card holders," she said. "Some have also complained why their check payments are not accepted by some credit card issuers."

She noted the creation of a Credit Cardholders' Bill of Rights in the US, which brings more transparency to the contractual relationship and empower consumers to manage their own credit.

"Definitely, our government must protect consumers who are lured by credit card companies with promises of low interest rates that go up sky-high without rhyme or reason," said Loren.

"Even credit card holders who are punctual in meeting their obligations are complaining of being assessed punitive interest rate increases."

The senator said that pending the passage of laws that would provide better protection to credit card holders, the government must work to rein lenders and to clamp down on predatory lending.

"The government must show political will to go against the giants of banking industry who offer credit lines to consumers with what are in reality usurious rates."

Most credit cards carry interest rates of 3.5 percent and above per month. In a year's time, the effective interest rate for so-called "revolving card holders" range from 42 percent and more, not including hidden charges.

Revolving borrowers are those who do not pay in full their total dues but only their monthly minimum payment requirement.

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