Philippine Central Bank Circulates Rules for Credit Card Collections

THE monetary Board of the Bangko Sentral ng Pilipinas (BSP, the Philippine central bank) has issued a circular on credit card collection, addressing growing complaints about “unfair” practices by some credit card issuers and collectors.

The circular calls on all banks, their subsidiaries or affiliate credit card companies and collection agents to apply “reasonable” and “legally permissible” means to collect payments and avoid “unscrupulous” acts.

It identifies the following as prohibited acts in collecting credit card receivables:

• use or threat of violence or other criminal means to harm the physical person, reputation, or property of any person;

• use of obscenities, insults, or profane language which amount to a criminal act or offense under applicable laws;

• disclosure of names of credit cardholders who allegedly refuse to pay debts, except as allowed under existing rules;

• threats to take any action that cannot be taken legally;

• communicating or threatening to communicate to any person any credit information known to be false, including failure to communicate that a debt is being disputed;

• any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a cardholder; and,

• making contact at unreasonable/inconvenient times or hours, which are defined as before 6 a.m. or after 10 p.m., unless the account is past due for more than 60 days or the cardholder has given permission, or that the said times are the only reasonable or convenient opportunities for contact.

The circular also requires card issuers to fully disclose the billing details behind transactions made in foreign currencies and/or outside the Philippines, such as application of payments, currency conversion, conversion commission and other currency conversion charges.

It also requires banks and non-banks to disclose restructured loans, past due restructured loans, and items in litigation in their respective ledgers.

Restructured loans refer to credit card receivables that have been renegotiated or modified to either lengthen or postpone the original scheduled installment payments, or substantially alter the original terms and conditions of the credit card agreement due to credit quality concerns.

This account does not include receivables whose original terms and conditions are modified at the instance of the cardholder but which have not shown weakness/deterioration at the time of renegotiation.