The Bangko Sentral ng Pilipinas (BSP), banks and their credit card units have put in place an inter-bank debt relief program (IDRP) to prevent delinquent payments and assist cardholders with financial problems settle their dues.
The IDRP, which was officially launched this month, will cover only credit card debts for now but would include unsecured personal loans later.
The BSP with members of the Credit Card Association of the Philippines (CCAP), including BDO Unibank Inc., has set up the debt restructuring program for problematic credit cardholders. Its purpose is to help “highly indebted and financially distressed (but well meaning) customers get back on track towards responsible credit use.”
“The spirit behind the IDRP is to rehabilitate and provide a second chance to financially distressed customers,” said CCAP Executive Director Alex Ilagan. “After a customer completes the payments of the program and proves financial soundness and capability, they will be treated as a new applicant if and when they apply for a new credit facility.”
Last year, some P2.32 billion worth of unpaid credit card debts were restructured by banks, or about 1.39 percent of the total industry receivables of P167.41 billion. CCAP said the interest rates range from zero percent to three percent with an average tenor of 48 months.
CCAP presently includes as members Asia United Bank, Bank of Commerce, Bank of the Philippine Islands, Citibank, China Banking Corp., Eastwest Banking Corp., Equicom Savings Bank, HSBC, Maybank, Metrobank Card Corp., Philippine National Bank, RCBC Bankard, SB Cards Corp., Standard Chartered Bank, and Union Bank of the Philippines.
“With the help of the BSP, CCAP and BDO, the IDRP aims to offer more affordable terms, lower interest rates, and reduce the equal monthly amortization of the customer to enable him or her to sustain paying the account and prevent further delinquency,” said Ilagan.
To enroll in the program, CCAP will review the debtor’s financial capacity. The repayment period is up to 10 years for “severe cases indebtedness” with a low rate of 1.5 percent per month or lower depending on the profile of the customer, debt to income ratio and completion of documents required for the program. The participating banks may also have the option to disapprove application for customers who misused and abused the credit facility granted by the banks, said CCAP.
Based on a statement, CCAP said that as part of the guidelines of the program, all existing credit cards of the customer will have to be blocked or cancelled upon enrolment of the accounts to the program.
Rebates and rewards earned will also be forfeited. “Additionally, customers cannot apply for new credit facility with the participating banks while the accounts under the IDRP are not yet fully settled.”
CCAP is currently developing what it called a centralized or single payment channel for those that will participate in the program. This will be ready within the year.
Manila Bulletin, June 8, 2016