After reading Credit Card Issuers Charging Interest Arising From Non-Payment Of The Outstanding Balance, read also Minimum Requirements For The Issuance Of Credit Cards
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Banks shall only charge interest or finance charges arising from the non-payment of the outstanding balance
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Such interest or finance charge shall continue to be imposed until the outstanding balance and applicable interest are fully paid
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Penalty for late payment shall be collected from cardholders only when the same is disclosed in the contract
Under the guidelines on the establishment and operations of credit card issuers to implement Republic Act No. 10870 or the Philippine Credit Card Industry Regulation Law, banks shall only charge interest or finance charges arising from the non-payment in full or on time of the outstanding balance based on the unpaid amount of the outstanding balance as of statement cut-off date, but excluding:
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the current billing cycle’s purchase transactions reckoned from the previous cycle’s statement cut-off date, and
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deferred payments under zero interest installment arrangements which are not yet due.
When should interest or finance charges be imposed on the unpaid outstanding balance?
The law says:
Interest or finance shall be imposed on the unpaid outstanding balance as of cut-off date each time a cardholder pays less than, or does not pay on time, the outstanding balance stated in his/her statement of account. Such interest or finance charge shall continue to be imposed until the outstanding balance and applicable interest are fully paid.
For credit card cash advances, a cardholder may be charged cash advances fees and finance charge on the date that the cash is obtained, subject to terms and conditions under the credit card contract or agreement.
For a loan where the principal is payable in installments, interest per installment period shall be calculated based on the outstanding balance of the loan at the beginning of each installment period.
May banks impose penalties for late payment?
The law says:
No late payment fees or penalty for late payment shall be collected from cardholders unless the collection of the same is fully disclosed in the contract or agreement between the bank and the cardholder. Such fees shall be based on the unpaid minimum amount due or a prescribed minimum fixed amount, whichever is lower. Also, said fees may be based on the total outstanding balance of the credit card obligation, including amounts payable under installment terms or deferred payment schemes, if the contract or agreement between the bank and the cardholder contains an “acceleration clause” and the total outstanding balance of the credit card is classified and reported as past due.
What is “acceleration clause”?
The law says:
Acceleration clause refers to any provision in the contract between the bank and the cardholder that gives the bank the right to demand the full settlement of the obligation in case of default or non-payment of any amount due, or for any valid reason.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding illegal dismissal, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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