Interest or finance charge, and processing fees ceiling for credit card receivables and cash advances

On 24 September 2020, the Bangko Sentral ng Pilipinas (“BSP”) issued Circular No. 1098, series of 2020, announcing the amendments to the Manual of Regulations for Banks (“MORB”) and the Manual of Regulations for Non-Bank Financial Institutions (“MORNFI”). Specifically, these amendments involve imposing a ceiling on interest or finance charges for credit card receivables, and processing fees of credit card cash advances.

Currently, banks may charge interest or finance charges at any rate arising from a credit card holder’s non-payment in full, or on time of the outstanding balance based on the unpaid amount of the outstanding balance as of the statement cut-off date, excluding the following:

1. the current billing cycle’s purchase transactions reckoned from the previous cycle’s statement cut-off date; and
2. deferred payments under zero-interest installment arrangements which are not yet due.

Similarly, subject to the terms and conditions under the credit card contract/agreement, a cardholder may be charged with fees and finance charges for credit card cash advances.

Effective 3 November 2020 however, interest or finance charges to be imposed by banks and other financial institutions on all credit card transactions shall be limited to a maximum annual interest rate of twenty-four percent (24%). For credit card cash advances, no other charges or fees shall be imposed or collected apart from the processing fee in the maximum amount of Two Hundred Pesos (P200.00) per transaction. These maximum rates shall be subject to the review of the BSP every six (6) months.

The ceiling, nonetheless, shall not apply to credit card installment loans which shall be subject to a monthly add-on rate of not exceeding one percent (1%), and to the rate of interest, commissions, premiums, fees, and other charges, on any loan, or forbearance of any money, goods, or credit, regardless of maturity and whether secured or unsecured, other than credit card receivables.

The amendments likewise mandated banks and other financial institutions to notify their cardholders at least ninety (90) calendar days prior to any change in the manner of computation of the outstanding balance and the amount of fees to be imposed on the cardholder.