Credit card firms are opposed to a proposal to put a cap on interest rates and surcharges, saying this would deprive them of the opportunity to operate profitably amid harsh economic conditions.
Alex G. Ilagan, president of the Credit Cards Association of the Philippines (CCAP), said interest rates and surcharges on credit cards should be left to market forces as these have gone down fairly well due to healthy competition among industry players.
"We are not in support [of the proposed cap on interest rates and surcharges]. We would rather let the market determine the rates," Mr. Ilagan said in a phone interview.
The Senate banks, financial institutions and currencies committee held a public hearing on Tuesday on the Senate Bill 1438, filed by Senator Francis G. Escudero on Sept. 13, 2007 that seeks to put an interest rate ceiling of 1% per month or 12% annually, without compounding, on purchases and cash advances made through credit cards.
The bill also seeks to limit surcharges and penalties to 1% per month, also 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 credit card facility," Section 3 of the bill read.
However, Mr. Ilagan said: "This might threaten the viability of the business. This would not allow us to operate profitably."
He added that healthy competition in the industry had lead to reasonable interest rates, which currently range from 2.5-3.5% per month.
Mr. Escudero was not available for comment.