BSP bans pre-approved credit cards
December 20, 2010 23:57:00
MANILA, Philippines—Banks will no longer be allowed to distribute pre-approved credit cards, a practice that has elicited fraud-related complaints from the public.
Responding to such complaints, the Bangko Sentral ng Pilipinas has issued guidelines tightening credit card regulation in the country. The guidelines, which will take effect 15 days after publication, prohibit banks from issuing pre-approved credit cards to potential clients.
Pre-approved credit cards—those that are issued without application by the intended recipients—are usually sent to target clients through regular mail or courier service. The instance the recipient uses the card for a purchase or cash advance automatically makes him or her a credit card customer liable to pay the applicable interest rate and service fees.
The problem with pre-approved credit cards, the BSP said, was that these make the supposed recipients prone to becoming victims of fraud. Some intended recipients do not get to hold the credit cards and the cards intended for them are fraudulently used by other people.
“The MB [Monetary Board of the BSP] gave particular weight to concerns that pre-approved cards have exposed the public to cases of fraud via unauthorized use of said cards,” the BSP said in a statement.
The new credit-card guidelines likewise require banks to notify a cardholder that his account would be endorsed to a collection agency at least seven days before the actual endorsement is made. Collection agencies are tapped to collect overdue accounts.
“The notification requirement is expected to also give cardholders enough time to consider whether it will be advantageous for them to settle before their accounts are endorsed to collection agents,” the BSP said.
Under the guidelines, cardholders should be notified about the identity of the collecting agent. This addresses concerns over unfair collection practices by some collecting agents, the BSP said.
Moreover, the new guidelines impose tighter disclosure requirements. A table of credit card transactions with the applicable interests and penalties will be included in billing statements.
Cardholders should also be reminded constantly in the billing statements that payment of only the minimum amount due, or any amount lower than the total amount due, for a billing cycle would result in the imposition of interest and other charges.
Regulators said some cardholders were not fully aware of how interest and charges were imposed on their purchases, while others were not aware that paying less than the total amount due resulted in the payment of applicable interest and charges.
They said transparency would help protect the public not only against fraud but also against unintelligent use of credit cards.
Documents from the BSP showed that outstanding credit-card loans amounted to P129.6 billion as of end-June this year, about 5 percent lower than the P135.9 billion a year ago.—Michelle V. Remo
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