Usurious interest rates slapped by credit card companies should be regulated to protect consumers from unconscionable hidden charges, Senator Chiz Escudero said.
In Senate Bill No. 166 (SBN 166), Escudero seeks to put a ceiling on interest rates and surcharges imposed by credit card companies and prohibit hidden charges that further burden plastic card holders.
“While credit cards are deemed as relief for consumers during bad times, woes begin when card companies levy interests and charges which are usually unknown to the users that eventually saddle them with more debts. We want to put a stop to the hidden charges which catch consumers unaware,” Escudero explained.
SBN 166 puts a cap of 1 percent per month or 12 percent per annum on the interest rates that credit card companies can charge. It also seeks to put a ceiling of 1 percent, without compounding on the surcharges and penalties imposed by these companies.
Current interest rates among credit card companies range from 2.5 percent to 3.5 percent.
“It is the state’s duty to come in and regulate interest rates among credit card companies to promote the general welfare of the people by assuring that only reasonable interest rates and surcharges will be imposed on credit card transactions, as well as prohibit hidden charges,” Escudero explained.
Cap on interest rates was lifted in 1982 when the Anti-Usury Law was suspended by the Central Bank. Since then credit card companies have been allowed to impose interest rates agreed by all parties.
Escudero, however, said that the repeal of the law does not give credit issuers the license to charge prohibitive rates.
“Every business ought to earn, there is nothing wrong with that. However, when the profit-seeking tactic is already burying consumers in an avalanche of hidden charges, the state has to draw the line for the welfare and benefit of its people,” Escudero pointed out.