Philippines financial authorities are discussing the possibility of establishing a debt-restructuring mechanism to address rising loan defaults among the country’s credit cardholders, many of whom may be defaulting nondeliberately.
Under such a system, Bangko Sentral ng Pilipinas would set up a mechanism by which cardholders who no longer can afford to pay their debts are given some form of relief, such as staggered payment schemes and an interest-rate reduction, a spokesperson for the central bank tells PaymentsSource. Such a system would encourage the cardholders to continue paying their debt obligations instead of going into default, he says.
Discussions thus far have focused on the responsibilities in such a mechanism and the issuance of guidelines that would avoid potential abuse by cardholders who might falsely claim to be experiencing financial difficulties, the spokesperson adds.
Commercial credit card receivables last year totaled 121.2 billion pesos (US$2.8 billion or 2.1 billion euros) for the six months ended June 30, up by 6% from 114.2 billion pesos for the same period in 2010, according to central bank data.
Nonperforming credit card loans accounted for 12.9% of total credit card loans, the spokesperson says, much higher than the overall nonperforming percentage for all types of loans, which is at less than 3%.
The central bank describes loans as nonperforming or bad when they remain unpaid for at least 30 days upon maturity, he says.
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