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- Albay Representative Joey Salceda has written a letter to the Bangko Sentral ng Pilipinas (BSP) asking for a cap on late credit card fees that financial institutions issue to customers who fail to pay or meet the minimum payment of the bill due date.
- Salceda cited that the accumulation of debts like this is dangerous for the country’s economy and for consumers, and called late credit card fees “unproductive debt” because it will continuously hurt consumers unless the government acts.
- Salceda also warned that the approval of Resolution No. 55 and Circular 1165 by the BSP, which adjust the cap on credit card interest rates back to 3%, will lead to the compounding effect of interest rate adjustments on late fees and other “junk” fees.
In his letter to the Bangko Sentral ng Pilipinas (BSP), Albay Representative Joey Salceda has asked to impose a cap on late credit fees that financial institutions issue to customers who fail to pay or meet the minimum payment of the bill due date, citing that the accumulation of debts like this is dangerous for the country’s economy and for consumers.
“In 2022, bank earnings from fees and commissions went up by an annual 13.6% to ₱121.851 billion, outpacing earnings growth from actual interest income of 12.8%. This suggests that increasingly, banks are profiting from activities such as fee-charging that do not directly increase credit availability in the market. Late credit card fees do not create additional consumer welfare, and merely increase non-productive debt,” Salceda explained.
According to the lawmaker, late credit card fees can reach as high as 7% of the unpaid minimum balance and can lead to higher interest rates because late fees are added to the finance charge computation.
Salceda even called late credit card fees “unproductive debt” because it will continuously hurt consumers unless the government will act:
“The more you allow banks to earn from such debts, instead of incentivizing them to create actually productive loan products, the less productive your credit will be. That’s terrible for the economy. And I am seeing signs of bank behavior pointing to that, including the increasing share of bank income from such fees,” he emphasized.
Moreover, the legislator also mentioned that BSP’s approval of Resolution No. 55, which adjusts the cap on credit card interest rates back to 3 %, and Circular 1165 to implement the resolution, the compounding effect of interest rate adjustments on late fees and other “junk” fees are bound to likewise increase.
“When all that debt accumulates, you will see banks sell these unproductive debts to debt collectors or other institutions – and some of them have predatory practices in loan collection. That’s like feeding bank consumers to the lions,” Salceda highlighted.
Salceda, being the vice chairperson of the House Committee on Banks and Financial Intermediaries and the chairperson of the House Committee on Ways and Means, has been active in releasing statements connected to the country’s finance industry.
During the BPI’s double debit glitch issue, he demanded the bank to compensate or reimburse the funds of customers who were affected.
In March 2022, Salceda insisted that the country should impose taxes on freelancers and online workers hired by companies overseas.
Then, in August 2022, the lawmaker refiled the Digital Economy Value Added Tax Law during the 19th Congress, adding that he is planning to create a group that will study the possibility of taxing digital assets, including crypto and NFTs.
“The rise in interest rates will increase accumulated unproductive debt. So I hope the BSP takes action in nipping the problem in the bud,” Salceda’s letter concluded.
This article is published on BitPinas: Solon Wants Bangko Sentral to Impose Cap on Late Credit Card Fees
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