To date, there are a total of three (3) Senate Bills on the subject of reimposing the usury law and on the proposed reduction of interest charged by credit card companies.
The three (3) Senate Bills are as follows:

1) Senate Bill No. 796, An Act Fixing the Rates of Interest Upon Loans and Forbearances by Amending Certain Sections of Act No. Twenty-Six Fifty-Five (2655) as Amended introduced by Senator Manuel B. Villar, Jr. (June 30, 2004, 13th Congress, First Regular Session);

2) Senate Bill No. 166, An Act Governing Credit Card and Other Access Device Transactions and Providing Penalties Therefor introduced by Senator Francis G. Escudero (July 6, 2010, 15th Congress, First Regular Session); and

3) Senate Bill No. 2492, An Act Governing Credit Card and Other Access Device Transactions and Providing Penalties Therefor introduced by Senator Ramon Bong Revilla, Jr. (September 30, 2010, 15th Congress, First Regular Session)

Also, Congressman Winston “Winnie” T. Castelo of the House of Representatives came out with House Resolution No. 474 (September 29, 2010, 15th Congress, First Regular Session), A Resolution Urging the House Committee on Banks and Financial Intermediaries to Look Into the Rates of Interest, Penalties, and Charges Being Collected or Demanded by Banks and/or Credit Card Companies from their Cardholders.

Section 1 of Senator Villar’s bill which proposes the reimposition of the Usury Law (Act No. 2655, as amended) states:

“Section 1. Section 1 of Act Numbered Twenty-Six Fifty-Five (Act No. 2655), as amended, is hereby amended to read, as follows:

“SEC. 1. The rate of interest for the loan or forbearance of any money, goods or credits or charges on credit cards and other cash advance arrangements. And the rate allowed in judgments, in the absence of express contract to such rate of interest, shall be twelve percent (12%) per annum or such rate as may be prescribed by the Monetary Board of the Central Bank of the Philippines for that purpose in accordance with the authority hereby granted: Provided, That said maximum rate shall not be more than three percentage (3%) points above the average interest rate of ninety (90) days government or treasury bills within the quarter preceding the Monetary Board’s imposition of said maximum rate.”

On the other hand, the Senate bills of Senators Escudero and Revilla, Jr. both have provisions that:

• Interest rates shall not exceed 1% per month or 12% per annum, without compounding;

• Surcharges or penalties shall not exceed 1% per month, without compounding;

• Reasonable attorney’s fees and expenses of collection completely disclosed to, sufficiently understood by and voluntarily agreed with by an applicant for a credit card shall be allowed.

Also, both the bills of Senators Escudero and Revilla, Jr. provide that the pertinent provisions of the Truth Lending Act shall apply.

One may ask: What is the Truth in Lending Act? This is Republic Act (RA) No. 3765 which was approved on June 22, 1963 entitled, “An Act to Require the Disclosure of Finance Charges in Connection with Extension of Credit.” As the title of the law clearly states, the Act requires the disclosure by the creditor of finance charges in connection with the extension of credit.

The salient features of the law are as follows:

• Any creditor as defined in the law is required to furnish in writing the borrower or debtor (a person to whom credit is extended) prior to the consummation of the transaction the following information:

(1) the cash price or delivered price of the property or service to be acquired;
(2) the amounts, if any, to be credited as down payment and/or trade-in;
(3) the difference between the amounts set forth under clauses (1) and (2);
(4) the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in terms of pesos and centavos; and
(7) the percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation.

• A creditor as defined in the law is any person engaged in the business of extending credit (including any person who as a regular business practice make loans or sells or rents property or services on a time, credit, or installment basis, either as principal or as agent) who requires as an incident to the extension of credit, the payment of a finance charge. (Finance charge as defined in the law includes interest, fees, service charges, discounts, and such other charges incident to the extension of credit as the Board may be regulation prescribe.)

• It is the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) that shall prescribe the rules and regulations of the Truth in Lending Act.

Do the provisions of the Truth in Lending Act apply to credit card transactions between credit card companies and credit cardholders? Yes. The writer of the series of articles believes so.

By the way, not only does the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) have the authority to prescribe the rules and regulations of the Truth in Lending Act – BSP also promulgated at least two (2) Circulars to govern the credit card operations of banks and subsidiary credit card companies. The two (2) Circulars aforementioned are: Circular No. 398 dated August 21, 2003 and published in one of the national newspapers on September 1, 2003. The other is Circular No. 454 dated September 24, 2004 and published in one of the national dailies on October 4, 2004.

One of the provisions in Circular No. 398 is for credit card companies to keep “strictly confidential” the data on the cardholder or consumer, except in the following circumstances:

a) disclosure of information is with the consent of the cardholder or consumer;
b) release, submission or exchange of customer information with other financial institutions, credit information bureaus, credit card issuers, their subsidiaries and affiliates;
c) upon orders of court of competent jurisdiction or any government office or agency authorized by law, or under such conditions as may be prescribed by the Monetary Board;
d) disclosure to collection agencies, counsels and other agents of the bank or card company to enforce its rights against the cardholder;
e) disclosure to third party service providers solely for the purpose of assisting or rendering services to the bank or card company in the administration of its credit card business; and
f) disclosure to third parties such as insurance companies, solely for the purpose of insuring the bank from cardholder default or other credit loss, and the cardholder from fraud or unauthorized charges.
(TO BE CONTINUED)