Philippine Credit Card Industry Regulation Law

Case Overview and Summary

Summary of the Philippine Credit Card Industry Regulation Law

Basic Policy and Scope (Sections 2-3):
- Foster development of credit card industry with fair practices aligned with global standards.
- Protect and educate credit cardholders.
- Covers all credit card issuers, acquirers, and transactions.

Supervision by Bangko Sentral ng Pilipinas (BSP) (Section 4):
- BSP to supervise credit card issuers and acquirers.
- Includes issuing rules, conducting examinations, ensuring compliance, and determining reasonableness of fees and charges.

Definitions (Section 5):
- Defines key terms like acceleration clause, acquirer, balance transfer, billing cycle, card association, cash advances, credit card, credit card issuer, credit card limit, default/delinquency, finance charges, installment purchases, industry association, membership fee, minimum amount due, outstanding balance, statement cut-off date, statement of account, and supplementary card.

Risk Management System Requirements (Section 6):
- Credit card issuers and acquirers must establish appropriate risk management system.
- System should be documented and cover organizational setup, information management, accounting policies, internal and external functions, and internal control.

Credit Card Issuance Requirements (Section 7):
- Credit card issuers must conduct know-your-client (KYC) procedures.
- Exercise due diligence in ascertaining applicants' good credit standing and financial capability.

Service Level Agreement (Section 8):
- Agreement between acquiring banks and merchants must require merchants to establish cardholder identity.
- Card issuers may verify purchases if there is reasonable concern about validity.

Credit Card Limit Determination and Changes (Section 9):
- Credit card issuers to determine credit limit based on cardholder's credit standing and financial capacity.
- Issuers may change credit limit based on risk management policies, with notification to cardholder.
- Cardholders may decline credit limit increase or request adjustment.

Finance Charge Imposition (Section 10):
- Finance charges and fees for non-payment or late payment shall be based on unpaid amount of outstanding balance.

Disclosure Requirements (Section 11):
- Credit card issuers must disclose finance charges, interest rates, default/late payment fees, balance calculation methods, other fees, foreign currency conversion methods, and payment reminders.
- Disclosures should be understandable and may be included quarterly in tabular format.

Computation Disclosure (Section 12):
- Credit card issuers must provide detailed explanation and clear illustration of how charges and fees are computed, as determined by BSP.

Changes in Computation and Fees (Section 13):
- Cardholders must be notified at least ninety (90) days prior to any change in computation method or fee amount.
- Cardholders may terminate account if changes are unacceptable, subject to Section 25.

Over-the-Limit Transactions (Section 14):
- If cardholder breaches credit limit, transaction may be processed at issuer's discretion, with disclosed fees.

Lost or Stolen Cards (Section 15):
- Transactions prior to reporting lost/stolen card shall be for cardholder's account.

Confidentiality of Information (Section 16):
- Credit card issuers, officers, employees, and agents must keep cardholder data confidential, except in specified circumstances like consent, court orders, credit bureaus, service providers, insurance companies, and fraud investigations.

Customer Assistance Unit (Section 17):
- Credit card issuers must establish customer assistance unit for prompt resolution of complaints, inquiries, and requests.

Billing Error Complaints (Section 18):
- Cardholders have up to thirty (30) calendar days from statement date to report billing errors.
- Credit card issuers must take action within ten (10) business days.

Appropriate Collection Manner (Section 19):
- Credit card issuers may use reasonable and legally permissible means for collection.
- Must observe good faith, reasonable conduct, and refrain from unscrupulous acts or harassment.

Third-Party Collection Agents (Sections 20-22):
- Credit card issuers may engage qualified third-party collection agents.
- Issuers must inform cardholders in writing about endorsement to collection agency, with agency details.
- Only one collection agency may be used at a time.
- Communication modes for debt collection shall be prescribed by BSP.

Due Date and Payment Application (Sections 23-24):
- If due date falls on weekend/holiday, it moves to next business day.
- Payments exceeding minimum amount shall be applied to fees, charges, and balances with highest interest rate first.

Account Termination (Section 25):
- Cardholders may cancel account anytime by paying outstanding balance in full or entering repayment agreement.
- Repayment may be one-time or installments, with interest generally applicable only for installments unless agreement is violated.

Administrative Sanctions (Section 26):
- Provisions of Section 37 of New Central Bank Act shall apply to credit card issuers, acquirers, directors, and officers for willful violations.
- Sanctions include fines and imprisonment, and suspension or cancellation of issuer's authority.

Violations (Section 27):
- Willful violation is punishable by imprisonment of two (2) to ten (10) years, or fine of fifty thousand pesos (₱50,000.00) to two hundred thousand pesos (₱200,000.00), or both.

Transitory Provision (Section 28):
- Existing credit card companies not supervised by BSP shall be given reasonable time to comply with rules and regulations, as determined by Monetary Board.

Separability Clause (Section 29):
- If any provision is held unconstitutional or invalid, other provisions shall remain in full force and effect.

Repealing Clause (Section 30):
- All other laws, decrees, executive orders, proclamations, and administrative regulations inconsistent with this Act are repealed or modified accordingly.

Effectivity (Section 31):
- This Act shall take effect fifteen (15) days after publication in the Official Gazette or at least two (2) national newspapers of general circulation.