PH Congress, House Bill 2551 to prohibit hidden credit card charges

A bill was filed in November 2013 that will prohibit credit card companies, and banks from imposing hidden penalties or charges on purchases and cash advances made by clients.

Rep. Raymond Mendoza had filed House Bill 2551 as he noted the urgency of the need to protect the consumers from the unreasonably high rates being imposed by banks and credit card companies.

The monthly rates, according to Rep. Mendoza, range from 2.5 to 3.5 percent for cumulative non-compounded interest rates of 30 to 42 percent annually.

“With the penalty,” Mendoza said, “late payment fees and other charges compounding, the rate is more than what ’5-6′ operators charge.”

Mendoza also quoted the High Tribunal’s decision, which ruled, “We are of the opinion that the interest rate and penalty charge should be equitably reduced to 2 percent per month or 24 percent per annum.”

Mendoza said that the bill will take into its effect the cap on interest rates and penalty charges as ruled by the Supreme Court.

Mendoza said that the bill also prohibits credit card companies from charging fees for exceeding the card holder’s credit limit since credit card authorized these transactions which resulted to exceeding credit limits.

Under the House Bill 2551, 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 or 12 percent per year, without compounding.

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Surcharges or penalties shall likewise be limited to 1 percent per month, without compounding.

The provisions of Section 37 of Republic Act 7653, otherwise known as the “New Central Bank Act,” shall apply to erring credit card issuers, acquiring banks, their directors and officers, including, but not limited to, the administrative sanctions that may be imposed, without prejudice to the criminal sanctions against the culpable persons provided in Section 25 hereof, for any willful violation of this law or any regulated rules, regulations, orders or instructions issued by the Monetary Board.

In addition, the violator shall face imprisonment of two to 10 years, or pay a fine of ₱50,000 to ₱200,000, or both, at the discretion of the court.

Source: Philippine Congress, Press Release, dated 26 November 2013; Update: Philippine Congress, Press Release, dated 21 February 2015