The Credit Card Association of the Philippines (CCAP) expressed its full support for the Bangko Sentral ng Pilipinas (BSP) in its assessment process of adjusting or maintaining the cap on credit card charges. According to Alex Ilagan, the executive director of CCAP, a balanced approach that considers both consumers’ welfare and the sustainability of credit card issuers is crucial in determining whether to adjust, maintain, or eliminate the credit card cap.
The BSP, which reviews the interest rate ceilings on credit card transactions biannually, is currently evaluating whether to retain or increase the three percent interest rate cap on credit card transactions. Last year, the central bank decided to keep the maximum interest rate on unpaid outstanding card balance at three percent per month or 36 percent annually.
Ilagan emphasized the importance of the BSP’s proactive assessment of the credit card industry. He highlighted that the review will take into account macroeconomic developments, the state of credit card financing, the stability of banks and credit card issuers, as well as consumer concerns and supervisory findings.
However, Ilagan also warned that a very restrictive pricing regime could lead to reduced credit access for the lower-end or higher-risk market segments. This, in turn, may force less qualified financial consumers to resort to unregulated lending with exorbitant rates.
Data from the central bank indicated that credit card receivables of the banking system reached P722.6 billion as of December 2023, a 30.1 percent increase from the previous year. Despite the high interest rate environment, credit card loans surged by 30 percent to P728.97 billion in January.
The rise in credit card loans suggests a strong demand for revolving credit to support household expenditure and serve as a payment instrument for merchants. Additionally, consumer loans increased by 25.2 percent to P1.29 trillion, indicating continued economic activity despite the challenging interest rate environment.
