House bill would warn credit card users of pitfall

The House of Representatives has passed on third and final reading a bill that would compel credit card firms to clearly indicate the “true cost” of cardholders’ debt in their billing statements.

House Bill 4655 will require credit card companies to indicate to cardholders the “high price” that they pay for remitting only the minimum amount due each month and defer paying off their entire outstanding balance, said House Deputy Majority Leader and Pasig Rep. Roman Romulo.

“We want cardholders to be fully informed that it will cost them an arm and a leg if they settle only the minimum monthly payment required (by card issuers), which is usually five percent of the full balance,” said Romulo, the bill’s main author.

The bill, which seeks to amend the 1998 Access Devices Regulation Law, or Republic Act No. 8484, was approved on Wednesday night just before the House adjourned its first regular session this year. Congress reopens for the second session in late July with President Aquino’s State of the Nation Address (Sona).

The bill requires the inclusion of the following cautionary statement on the billing statement: “Warning: Making the minimum payment only or any amount less than the total amount due for the billing cycle/period will increase the amount of interest and other charges you pay and the time it takes to repay your balance.”

According to Romulo, credit card firms have been cleverly pushing consumers to settle only the minimum monthly payment required precisely because they (card issuers) stand to collect considerably larger interest payments the longer the cardholder keeps a huge outstanding balance unpaid.

“Our bill will give more meaning to the Truth in Lending Act, which protects the people from lack of awareness of the true cost of credit by assuring the full disclosure of such cost, with a view to discouraging the uninformed use of credit to the detriment of the economy,” he said.

The bill also compels banks to include the following repayment information in every card billing statement:

•The number of months (rounded to the nearest month) that it would take to payoff the entire amount of the outstanding balance, if the consumer pays only the required minimum monthly payments and if no further advances are made;

•The total cost, including interest and principal payments, of paying that balance in full, if the consumer pays only the required minimum monthly payments and if no further advances are made;

•The monthly payment amount that would be required for the consumer to eliminate the outstanding balance in 36 months, if no further advances are made; and

•The total cost to the consumer, including interest and principal payments, of paying that balance in full if the consumer pays the balance over 36 months.

The bill also seeks to place all credit card companies directly under the supervision of the Bangko Sentral ng Pilpinas (BSP).

At present, only card issuers affiliated with banks are supervised by the BSP.