The Philippines’ Department of Trade and Industry in August said it will pass the question of how to handle banks’ excessively high credit card interest rates on to the Bangko Sentral ng Pilipinas, the country’s central bank.
The department said national credit card interest rate policies do not fall under its jurisdiction, despite certain agencies suggesting it had authority in the matter.
The central bank declined to comment on the issue when contacted by PaymentsSource.
The country’s Supreme Court in 2009 ruled that charging an interest rate of more than 24% per annum to credit cardholders is excessive and unconscionable.
The decision involved a complaint by a Bank of the Philippine Islands customer who claimed she was charged excessive penalty fees on a credit card with an unpaid balance.
“We are of the opinion that the interest rate and penalty charge of 3% per month should be equitably reduced to 2% per month or 24% per annum,” the court said in its ruling.
The court noted that in previous rulings it has affirmed that credit card interest rates of 3% or month and higher are “excessive” and “unconscionable.”
The central bank in 1983 effectively removed the ceiling on interest rates for both secured and unsecured loans, the court said.
But the court noted that the bank’s policy did not grant “carte blanche authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead to a hemorrhaging of their assets.”
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