MANILA, Philippines – A bill seeking to regulate interest rate and surcharges imposed on credit card transactions to no more than one percent a month or 12 percent per annum has been filed in the Senate in an effort to protect the economic interest of the people and to stop banks or issuing entities from enslaving credit cardholders.

Senate Bill No. 2492, otherwise known as “An Act Governing Credit Card and Other Access Device Transactions and Providing Penalties Therefore” was introduced by Senator Ramon “Bong” Revilla Jr. The bill has been referred to the Senate committee on banking institutions under Senator Sergio Osmeña. Public hearings will be scheduled.

Section 6 of the bill, “Imposable Interest Rates and Charges,” provides that “interest rates imposed on any credit card on purchases and cash advances made through such facility shall in no case be higher than 1 % per month or 12% per annum, without compounding.”

The bill also provides that surcharges or penalties shall likewise be limited to a ceiling of 1 % per month, without compounding.

“No other costs shall be imposed other than the foregoing except for 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,” the bill stated.

SB 2492 also seeks to punish perpetrators with a penalty of imprisonment of arresto mayor or a fine ranging from P50,000.00 to P100,000, or both, depending upon the gravity of the act committed and the circumstances attendant thereto as may be determined by the court.

Violations committed by corporation, trust or firm, partnership, association, or any other entity, a penalty or imprisonment shall be imposed on the entity's responsible officers, including, but not limited to, the president, vice-president, chief executive officer, general manager, managing director, or partner directly responsible therefor.

In case the violation is committed by, or in the interest of a foreign juridical person duly licensed to engage in business in the Philippines, such license to engage in business in the Philippines shall immediately be revoked.

It could be recalled that the Supreme Court of September 2009 in a case involving petitioner Ileana Macalinao versus Bank of the Philippine Islands, ruled that, charging an interest rate of more than two percent per month or 24 percent per annum to credit cardholders is excessive and unconscionable and such are void for being contrary to morals, if not against the law.

The Court also noted that while the Central Bank Circular No. 905-82, which took effect on January 1, 1983, effectively removed the ceiling on interest rates for both secured and unsecured loans, regardless of maturity, “nothing in the circular could possibly be read as granting carte blanche authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead to a hemorrhaging of their assets.”

The high court also said the Macalinao case was not the first for SC.

In the case Chua vs. Timan; the Court held that,” The stipulated interest rates of 7 percent and 5 percent per month imposed on respondents’ loans must be equitably reduced to 1 percent per month or 12 percent per annum. We need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates of 3 percent per month an higher are excessive, iniquitous, unconscionable exorbitant.”

In filing the bill, Revilla noted of the steady increase of credit card use since it was introduced to Philippine market in the 1970s.

“Republic Act 8484 is limited and it only regulates the issuance of access devices. Senate Bill 2492 amends the 11-year-old law. It will provide more transparency on the part of credit card companies to ensure that the consumer is more aware of the scope of his debt/obligations. It also seeks to regulate the interest rates charged by the companies and prohibit hidden charges on credit card transactions,” the senator stated.