State policy and coverage of transactions
- The State policy is to foster the development of the credit card industry as an indispensable tool to make consumer credit readily available under fair and sound consumer credit practices aligned with global best practices (Section 2).
- The State policy is to promote an efficient payments system and encourage competition and transparency to support more effective credit card service delivery (Section 2).
- The State requires mechanisms to protect and educate credit cardholders to ensure industry vibrancy and growth (Section 2).
- The law governs all credit card issuers, acquirers, and all credit card transactions (Section 3).
Definitions establishing key terms
- An acceleration clause is a contract provision allowing the credit card issuer to demand full settlement of the obligation in case of default or nonpayment of any amount due, or for any valid reason (Section 5(a)).
- An acquirer is the institution that accepts and facilitates processing of the credit card transaction initially accepted by the merchant (Section 5(b)).
- Billing cycle/billing period means the period between billings, and billing cycles must comprise at least fifteen (15) days (Section 5(d)).
- A card association is a company that provides credit card network services such as American Express, VISA International, MasterCard International, JCB International, Diners Club, and China Union Pay (Section 5(e)).
- Cash advances are cash obtained from the credit card account in any manner availed by the cardholder (Section 5(f)).
- A credit card is any card or other credit device intended to obtain money, property, or services on credit (Section 5(g)).
- A credit card issuer is a bank or a corporation that offers the use of its credit card (Section 5(h)).
- Credit card limit is the maximum total amount for purchases, cash advances, balance transfers, and finance charges, service fees, penalties, and other charges that may be charged to the credit card (Section 5(i)).
- Default or delinquency is nonpayment or payment of less than the minimum amount due or minimum payment required, or similar wording, for at least three (3) billing cycles (Section 5(j)).
- Finance charges are interest charged on all credit card transactions in accordance with the cardholder agreement terms (Section 5(k)).
- Installment purchases are transactions paid in amortized parts over a fixed period (Section 5(l)).
- An industry association is an association composed of companies engaged in banking, finance, credit, and payments business (Section 5(m)).
- Membership fee is the amount levied for the right to use the credit card and acquire other membership benefits; it may be called annual membership fee, annual fee, joining fee, or application fee (Section 5(n)).
- Minimum amount due / minimum payment required is the minimum required payment on or before the payment due date for a billing period and may include amounts determined by the rules in Section 5(o)(1)–(4) (Section 5(o)).
- Outstanding balance is the amount to be repaid as of the statement cut-off date (Section 5(p)).
- Statement cut-off date is the end date of a billing cycle determined by the issuer when account activities are summarized (Section 5(q)).
- Statement of account / billing statement is the regular statement listing purchases, payments, and other debits/credits during the billing cycle (Section 5(r)).
- A supplementary card / extension card is a credit card issued to another person whose credit limit is consolidated with the primary cardholder (Section 5(s)).
- Balance transfer is the transfer of the balance in a credit card account to another credit card account (Section 5(c)).
BSP supervision and regulatory mechanisms
- The Bangko Sentral ng Pilipinas (BSP) supervises all credit card issuers and acquirers (Section 4).
- BSP supervision includes issuing rules of conduct and establishing standards of operation uniform to all covered institutions or functions, including penalties for noncompliance (Section 4(a)).
- BSP conducts examinations as determined by the Monetary Board to determine compliance with laws and regulations (Section 4(b)).
- BSP provides oversight to ensure compliance with laws and regulations (Section 4(c)).
- BSP determines the reasonableness of fees and charges and issues regulations on the same (Section 4(d)).
Risk management, KYC, and credit limit rules
- Credit card issuers and acquirers must establish an appropriate risk management system documented in a complete and concise manner to manage risk exposures from credit card operations (Section 6).
- The risk management system must cover organizational set-up for the unit handling the credit card business, information management system, accounting policies and procedures, internal and external functions, and the internal control system (Section 6).
- Before issuing credit cards, issuers must conduct know your-client (KYC) procedures and exercise proper diligence to ascertain applicants have good credit standing and are financially capable of fulfilling credit commitments (Section 7).
- Service level agreements between acquiring banks and partner merchants must require merchants to perform due diligence to establish identity of cardholders (Section 8).
- Issuers may verify or seek confirmation with a cardholder on any purchase when there is reasonable concern about the validity of the purchase (Section 8).
- Issuers must determine credit limits based on the cardholder’s credit standing and financial capacity (Section 9).
- Issuers may implement changes in the credit limit based on risk management policies and guidelines, but the cardholder must be notified of changes (Section 9).
- The cardholder may decline any credit limit increase (Section 9).
- The cardholder may request a credit limit adjustment, subject to issuer approval (Section 9).
Finance charges, disclosures, and billing protections
- Finance charges and other fees arising from nonpayment in full or on time must be based on the unpaid amount of the outstanding balance (Section 10).
- Issuers must disclose to all credit cardholders and potential cardholders key cost and terms items, including:
- Finance charges for unpaid amounts after the payment due date (Section 11(a)).
- The interest percentage expressed as a simple monthly or annual rate on the outstanding balance (Section 11(b)).
- Default, late payment/penalty fees, or similar delinquency charges, subject to the late payment fee/penalty limit and conditional rule in Section 11(c) (Section 11(c)).
- The method of determining the balance used for interest and/or delinquency charges (Section 11(d)).
- The method of determining the interest and/or delinquency charges, including any minimum or fixed amounts (Section 11(e)).
- Other fees such as membership/renewal fees, processing fees, over-the-limit fees, collection fees, credit investigation fees, and attorney’s fees (Section 11(f)).
- Foreign currency/dual currency conversion manner to Philippine pesos or billing currency, with a definition or general description of conversion rates (Section 11(g)).
- A minimum payment warning printed in the billing statement in the exact form: “Important Reminder: Paying less than the total amount due will increase the amount of interest you pay and the time it takes to repay your balance” (Section 11(h)).
- Any other information required by the BSP (Section 11(i)).
- Issuers must endeavor to convey the information in a manner that is understandable to the cardholder (Section 11).
- Issuers may include the enumerated disclosure items in the billing statement on a quarterly basis at the minimum in tabular format (Section 11).
- Issuers must provide, to the extent practicable, a detailed explanation and clear illustration of how all charges and fees are computed, and BSP determines the implementation date (Section 12).
- Cardholders must be notified at least ninety (90) days before any change in the manner of computation of the outstanding balance and the amount of fees; the cardholder may terminate the account if the change is unacceptable under Section 25 (Section 13).
- Compliance with the 90-day notice for changes may be deferred for a reasonable time that BSP determines to allow system modifications (Section 13).
- Over-the-limit transactions may be processed if the cardholder breaches the credit limit by a new transaction, subject to issuer discretion, and related fees must be clearly and prominently disclosed in the table of fees and charges (Section 14).
Lost cards, confidentiality, assistance, and billing errors
- If a credit card is lost or stolen, transactions made prior to reporting to the issuer are for the account of the cardholder (Section 15).
- Issuers, their officers, employees, and agents must keep cardholder data strictly confidential except in circumstances such as:
- With cardholder consent (Section 16(a)).
- Releasing/submitting/exchanging customer information with credit information bureaus, industry associations, or card associations (Section 16(b)).
- Under court orders or government agency orders authorized by law, or under conditions prescribed by BSP (Section 16(c)).
- Disclosure to third-party service providers solely to assist or render services in enforcing rights against the cardholder (Section 16(d)).
- Disclosure to insurance companies solely to insure the issuer against cardholder default or other credit loss, and the cardholder from fraud or unauthorized charges (Section 16(e)).
- Disclosure to third parties to investigate fraud or unauthorized activities or mitigate risk involving card issuance, use, and acquiring (Section 16(f)).
- Recipients of confidential information under the permitted circumstances must also preserve confidentiality of cardholder data (Section 16).
- Every card issuer must establish a customer assistance unit responsible for prompt action for expeditious resolution of complaints, inquiries, and requests (Section 17).
- For billing errors or discrepancies, issuers must allow cardholders up to thirty (30) calendar days from statement date to report errors/discrepancies, and issuers must act within ten (10) business days from receipt of notice (Section 18).
Debt collection conduct and third-party collection
- Issuers may resort to all reasonable and legally permissible means to collect amounts due under the credit card agreement, but must observe good faith, reasonable conduct, proper decorum, and must refrain from unscrupulous acts (Section 19).
- Issuers or collection agents must not harass, abuse, or oppress any person or engage in unfair practices in collecting credit card debt, as defined by BSP rules and regulations (Section 19).
- Issuers may engage qualified third-party service providers/collection agents to assist in administration of credit card business, including recovery of unpaid obligations and enforcement of rights (Section 20).
- Issuers must inform the cardholder in writing of endorsement of credit card debt collection to a collection agency, or endorsement from one collection agency to another, prior to the actual endorsement, and the notice must include the collection agency’s full name and contact details (Section 21).
- The written notice requirement for endorsement must be included in the terms and conditions of the credit card agreement (Section 21).
- Issuers must refer the collection of an account to only one collection agency at any one time (Section 21).
- Issuers or collection agencies may communicate with cardholders in connection with debt collection only through modes prescribed by BSP guidelines issued for that purpose (Section 22).
Payment due dates and allocation of payments
- If a credit card payment due date falls on weekends and regular national holidays, the due date automatically moves to the next business day (Section 23).
- Payment through any authorized mode made to accredited payment centers of the issuer is considered made on the same date (Section 23).
- When an account has different interest rates for different types of purchases (cash advances, regular purchases, balance transfers), issuers must apply amounts in excess of the minimum payment amount first to fees and charges, then to the billed balance bearing the highest interest rate, followed by the next higher rate, until the payment is exhausted (Section 24).
- Promotional offer original rates govern the hierarchy of payment (Section 24).
Termination, account cancellation, and repayment
- A cardholder may cancel or terminate the account anytime (Section 25).
- Account termination requires either:
- Paying in full, or
- Entering into another agreement for payment of the outstanding balance and new purchases, debits, and deferred installments through either a one-time payment or installments within a fixed period of time (Section 25).
- Repayment in installments under the new agreement is generally subject to interest unless there is a violation of the new agreement (Section 25).
Administrative sanctions and suspension/cancellation
- Section 37 of Republic Act No. 7653 (the New Central Bank Act) applies to any credit card issuer, acquirer, and their directors and officers for administrative sanctions for willful violation of Republic Act No. 10870 or related rules, regulations, orders, or instructions issued by the Monetary Board, without prejudice to criminal sanctions under Section 27 (Section 26).
- In addition to administrative sanctions, BSP may suspend or cancel the authority of a credit card issuer to issue credit cards (Section 26).
Criminal penalties for willful violations
- A person who willfully violates any provision of Republic Act No. 10870 or any related rules, regulations, order, or instructions issued by the Monetary Board faces:
- Imprisonment of not less than two (2) years nor more than ten (10) years, or
- A fine of not less than fifty thousand pesos (P50.000.00) but not more than two hundred thousand pesos (P200,000.00), or
- Both, at the discretion of the court (Section 27).
Transitional, separability, and repeals
- Existing credit card companies not supervised by BSP must be given reasonable time as the Monetary Board determines to comply with applicable rules and regulations (Section 28).
- If any provision or section is held unconstitutional or invalid, the remaining provisions continue in full force and effect (Section 29).
- All other laws, decrees, executive orders, proclamations, administrative regulations, or parts inconsistent with Republic Act No. 10870 are repealed or modified accordingly (Section 30).