THE Credit Card Association of the Philippines (CCAP) on Wednesday rejected the proposal to limit credit-card interest charges, saying such a limit could only force credit-card companies to limit access to credit by consumers.
CCAP strongly opposed the planned legislative measures capping the imposition of a maximum limit on interest rates that may be levied by credit-card companies, as such could lead to the closure of the credit-card business in the country.
According to CCAP President Harry Gue, there are some 7.6 million credit-cards issued in the Philippines as of December 2013. This roughly translates to 3 million to 4 million credit-card holders, as most Filipinos carry two to three credit cards in their wallets.
Credit-card billings went up 14 percent from P471 billion in 2012 to P540 billion in 2013.
In terms of magnitude, credit-card receivables now account for almost 22 percent of total consumer loans granted in the banking system.
“If the absolute cap is set at 12 percent, which would be the lowest in the world, all card business in the Philippines would definitely close shop, as the business would no longer be viable,” he said.
“One would think that placing a ceiling on the interest rate of credit cards would ultimately benefit the consumers. However, studies show that in cases where government placed an interest-rate ceiling, credit-card companies were less willing to extend credit to consumers,” he said in an industry position paper.
CCAP said that in Japan, consumer lending dropped by a staggering two-thirds in two years. Also, illegal-lending cases increased after the capping of interest-rate charges.
CCAP said among the leading retailers, credit-card transactions account for 30 percent to 35 percent of total purchases, which shows how credit cards have successfully upgraded the quality of life of typical Filipino family.
Last year total credit-card spending accounted for some 10 percent of total household final consumption expenditures in the country.
“Increase in consumption through credit cards played a pivotal role in sustaining the country’s economic growth as consumer spending is one of the drivers of GDP,” CCAP said.
Should the card companies cease to grant credit, the 30 percent of consumer spending in retail outlets is automatically put in jeopardy, CCAP said.
Currently, there are a wide range of credit-card products with interest rates as low as 2 percent per month. CCAP said customers have a choice in which credit card they choose to apply.