Published 05 October 2018, The Daily Tribune
The “ber” months had already begun. Shopping is in the air and sales and bazaars are just around the corner. People start crowding the malls to score awesome deals and cool gift finds for themselves and loved ones. The temptation to swipe is so hard to resist, which makes it all the more important to know your credit card law.
Recently, the Monetary Board (MB) approved the regulations implementing the Philippine Credit Card Industry Regulation Law (Republic Act No. 10870.) Under the law and its Implementing Rules and Regulations (IRR), credit card issuers are now required to conduct know-your-client (KYC) and customer identification procedures to ascertain whether the applicants possess good credit standing and are financially capable of fulfilling their credit commitments. All credit card applications are required to undergo a strict credit underwriting process which means that the credit card company should verify and validate the information given by the applicants.
With this, credit card companies can no longer issue pre-approved credit cards or those unsolicited credit cards issued to consumers who have not applied for such credit cards. They are also prohibited from doing similar acts which are deemed tantamount to the act of issuing pre-approved credit cards, such as: (a) sending of credit cards to consumers with no prior application; (b) sending of unsolicited supplementary cards with added features which are not in replacement or substitute to an existing cardholder’s initial credit card; (c) unsolicited calls by a credit card issuer offering credit card as a reward for a client’s good standing and/or continued patronage of the credit’s other financial product; (e) sending of mails with credit card enclosed which will be deemed accepted either upon the receipt of such card by the receiver, or unless the cardholder promptly requests for its termination; and (g) sending of credit cards as free offers to consumers.
In determining the credit limit to be extended to the cardholder, card issuers should evaluate the applicant’s credit standing, credit history and financial capacity. They may increase or decrease the credit limit provided the cardholder shall be notified of such changes and shall have the option to decline any increase in their credit limit.
In order to protect the cardholders against identity theft, fraud and scams, credit card issuers are also required to keep the credit cardholder’s information strictly confidential and they cannot share the same to third persons except upon the cardholder’s informed consent, and under specific conditions defined by the law. Apart from credit card issuers, their partner merchants are also mandated to perform due diligence, particularly in ascertaining the identity of cardholders. It is now mandatory that the agreement between the credit card company and partner merchants contains a provision requiring merchants to perform due diligence to establish the identity of card holders. For instance, the merchants may now request an ID from the purchaser before the transaction could be charged on the credit card.
All credit card issuers are also required to fully disclose the manner of computing finance charges and other fees related to credit card use as well as provide ample notification prior to effecting any changes in the said charges. They must also establish consumer assistance units to expeditiously address credit card related complaints, inquiries and requests. In case of any error or discrepancy in the statement of account or billing statement, the cardholder shall report the same to the credit card company within thirty (30) calendar days from statement date. The manner of reporting may be through written, verbal or any documented means. The company is required to immediately take action by conducting an investigation, making the appropriate corrections in the records and sending a written explanation to the cardholder.
Prohibitions against unfair collection practices have also been strengthened. Credit card companies may resort to all reasonable and legally permissible means to collect amounts but they must observe good faith, reasonable conduct and proper decorum, and refrain from engaging in unscrupulous acts. While they may engage third party service providers/collection agents to assist in the recovery of unpaid obligations, they should first inform the cardholder that his account is being endorsed to a collection agency. The notice shall include the full name of the collection agency and its contact details. The collection of an account can be endorsed to only one collection agency/agent at any one time. In any event, the credit card issuer and the collection agent shall not harass, abuse or oppress any cardholder or any person, or engage in any unfair practices in the collection of credit card debt.
The foregoing rules and guidelines should be complied with, otherwise, any person who willfully violates any provision of RA 10870 may be punished by imprisonment of two to 10 years, or by a fine of P50,000 to P200,000, or both, at the discretion of the court. In addition to the administrative and criminal sanctions that may be imposed on credit card issuers for violation of the law, their authority to issue credit cards may be suspended or cancelled by the Bangko Sentral ng Pilipinas (BSP).
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