The revision of the aging structure of credit card receivables would also allow banks and credit card companies to write off uncollectible receivables after 180 days while receivables that have not been collected within 90 days would be considered past due.
BSP Deputy Governor Alberto Reyes said the adjustment would bring the local practice at par with international standards that have been tailor-made specifically for credit cards.
According to Reyes, the country’s aging structure for credit card receivables are based on the structure applied on regular loan accounts of banks. "We patterned it to installment receivables," he said.
The changes, Reyes pointed out, would only acknowledge the differences between the two and incorporate the peculiarities of credit card loans.
"We have to determine the generally acceptable reckoning for past due receivables and definitely, there will be an aging formula," Reyes said. "This will help clean up the receivables of the industry."
Based on generally accepted international practices, Reyes said credit card receivables that have not been collected beyond 180 days are written off immediately.
This means that banks and credit card companies have to make provisions for past due receivables but it would also mean that credit card holders could no longer dally on payments.
However, Reyes admitted that that the BSP has to consider the complexities that now prevail in the credit card industry and factor these into the policy guidelines under consideration.
"One thing we would have to consider is the common practice of banks these days to allow, say, 12-month installments that allow credit card borrowers to service their debts in small increments," he said.
On the other hand, Reyes said the BSP is still studying the proposal of credit card companies to lower the three percent interest charge to attract more subscribers despite efforts to impose more stringent requirements on the issuance of new cards.
Alarmed by the increase in delinquent credit card accounts, the BSP had began requiring credit card companies to screen card holders and set the credit limit based on their net take-home pay.
Reyes said that the Credit Card Association had reported having complied with the new BSP requirements but the industry was also studying the possibility of lowering interest charges and penalty charges on card borrowing.
Credit card companies wanted to lower the interest rate in an attempt to make the service cheaper for existing card holders," Reyes said.
At present, card holders paying on time but on installment basis are charged with a three percent interest charge on their principal. If they are overdue, they pay penalty charges.