Cagayan Rep. Jack Enrile lauded the Monetary Board's decision to disallow banks from charging "flat" interest rates on loans, saying the new policy is a victory for the public that will boost initiatives aimed at promoting consumer protection and financial reform in the country’s banking sector.
Enrile - who has been leading calls to end banks' unfair practices such as the collection of excessive interest rates from consumers - said the Monetary Board's Resolution No. 1018 only validates his earlier claims that banks have been making hefty profits from excessive interest rates they charge to consumers.
Enrile is author of House Bill No. 4819 or the Credit Access and Protection Reform Act of 2011 which seeks to protect credit card holders from exorbitant fees and interest rates collected by credit card companies in the country.
"This decision to end a common - albeit unfair - practice among banks to charge excessive interest rates and other hidden charges on hapless consumers is a very welcome development in our efforts to clean up the banking industry. This answers our push for the BSP to put into place a firm policy that promotes consumer protection simply by disallowing banks from charging excessive interest rates on loans," Enrile said.
"We know that there is still a lot that needs to be done to protect the consuming public from unfair banking practices, and we are encouraged by this pronouncement to pursue this advocacy."
On July 7, the Monetary Board approved Resolution No. 1018 that prohibits banks from using the so-called "flat" interest rates and other methods that seek to enhance the marketability of banks' loan products but misleads the public about the true cost of their borrowings.
In its statement, the Bangko Sentral ng Pilipinas (BSP) said the common practice of banks to use "flat" rates and tuck in hidden costs misleadingly feature a lower contractual interest rate in the computation of consumers' loan payments.
Under the new rules, banks are required to charge interest on the outstanding balance only of a loan at the beginning of an interest period. BSP said the new policy takes effect on July 1, 2012.
In his statement, Enrile said with this new policy in place, the BSP should also start looking into the exorbitant interest rates being interest rates and other fees collected by credit card companies.
"With this new policy now in place, the logical next step for the BSP is to review the interest rates being charged by credit card companies which has long placed the consuming public at a disadvantage," Enrile said.
Enrile earlier filed a bill seeking to place a cap on the interest rates charged on deferred payments made on credit card purchases to 1% per month, saying the current 3.5% average interest rate charged by credit card companies is just way too much.
The lawmaker cited three Supreme Court rulings that consistently uphold the position that "interest rates of 3% per month or higher are excessive, iniquitous, unconscionable and exorbitant."
Enrile noted that without government intervention on the current policies implemented by credit card companies, credit card holders will continue to fall victim to sky-high interest rates and other fees collected by credit card companies saying compounded interests and penalty rates collected from a credit card holder can skyrocket to 42% per annum due to deferred or late payments.
Source: http://www.congress.gov.ph
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