Title
Amendment re Credit Card Operations Rules
Law
Bsp Circular No. 454
Decision Date
Sep 24, 2004
BSP Circular No. 454 amends regulations governing credit card operations for banks and subsidiary companies, introducing guidelines aligned with global best practices, defining key terms, and establishing standards for fair collection practices and disclosure of foreign currency transactions.

Law Summary

Amendment on Credit Card Operations Policy in Banks and Non-Bank Financial Institutions

  • Revised paragraph in MORB and MORNBFI emphasizes alignment with global best practices for credit card operations of banks and subsidiary/affiliate credit card companies.

Clarification of Terminology Regarding Subsidiary and Affiliate Credit Card Companies

  • Banks and/or their subsidiary credit card companies as referenced in specified subsections of MORB and MORNBFI now explicitly include affiliate credit card companies.

Integration of Credit Risk Guidelines

  • Guidelines from Circular No. 398 on monitoring problem loans and setting allowance for probable losses incorporated into MORNBFI.
  • Classification and allowance provisions under Appendix Q-10 of MORNBFI are applicable.

Definitions of Subsidiary and Affiliate Entities

  • "Subsidiary" defined as a corporation with more than 50% outstanding voting stock owned or controlled by a bank or financial institution.
  • "Affiliate" defined by criteria such as: ownership/control/voting rights of at least 10%, interlocking directorships (excluding independent directors), common ownership of at least 10%, or management contracts granting policy direction.

Expanded Disclosure Requirements for Foreign Currency and Dual Currency Transactions

  • Obligations to disclose details of payment applications, currency conversion methods, definition of exchange rates (including mark-up), conversion commissions, and other currency-related costs for foreign currency transactions and dual currency accounts.

Prohibition of Unfair Collection Practices

  • Banks, subsidiary/affiliate credit card companies, collection agents must exercise rights in good faith and reasonable conduct.
  • Proscribed behaviors include:
    • Use or threat of violence or criminal means
    • Use of obscene or profane language constituting criminal acts
    • Unauthorized disclosure of non-paying cardholders
    • Threats to take illegal actions
    • False or deceptive communications
    • Contact at unreasonable hours (before 6:00 AM or after 10:00 PM) unless exceptions apply.

Addition of Specific General Ledger (GL) Accounts

  • Addition of GL accounts related to restructured credit card loans:
    1. Restructured Loans - Credit Card Receivables: for renegotiated or modified credit card receivables showing credit quality concerns.
    2. Past Due Restructured Loans: restructured receivables past due under existing rules, pending payment or formal arrangements.
    3. Items in Litigation - Restructured Loans: restructured receivables subject to court proceedings, with related litigation expenses accounted separately.

Effectivity Clause

  • The Circular takes effect fifteen (15) days after publication in the Official Gazette or a newspaper of general circulation.

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