Question & AnswerQ&A (CIRCULAR NO. 1003)
The primary objective of Section X320 of the MORB is to foster the development of the credit card industry by making consumer credit readily available under fair and sound business practices aligned with global best practices, ensuring transparency, competition, and effective delivery of credit card services.
A credit card refers to any card or other credit device, including its virtual representation, intended for the purpose of obtaining money, property, goods or services on credit.
Default or delinquency refers to non-payment of, or payment of an amount less than, the minimum amount due or minimum payment required for at least three billing cycles, after which the total amount due or outstanding balance as reflected in the monthly statement may be considered in default or delinquent.
A bank must commence its credit card operations within six months from submission of the required documents and must submit a written notice of commencement within ten banking days thereafter.
Banks must disclose finance charges, itemized fees and charges, interest rates, installment loan terms, late payment fees, currency conversion details for foreign transactions, reminders about minimum payments affecting interest, a table of all applicable fees and penalties, and any other information required by the Bangko Sentral. The disclosures must be clear, understandable, and timely.
Late payment fees or penalties can only be charged if fully disclosed in the credit card agreement, based on the unpaid minimum amount due or prescribed minimum fixed amount, whichever is lower. Fees based on the total outstanding balance are allowed if the contract contains an acceleration clause and the credit is classified and reported as past due.
Any transactions made before the cardholder reports the loss or theft are for the cardholder's account, but the cardholder can dispute unauthorized or fraudulent transactions which the bank must correct or reverse, including related finance charges and fees, in accordance with procedural regulations.
Violations may result in enforcement actions by the Bangko Sentral including administrative sanctions such as fines and penalties under Section 37 of R.A. No. 7653, suspension or cancellation of the bank's authority to issue credit cards, and other sanctions depending on severity, including penalties for operating without notification or erroneous reports.