Owning a credit card help Individuals in managing their budget. Instead of purchasing necessary items in cash, one can opt for a deferred payment at the same price or in exchange of a very minimal mark-up. And whether you are engaged in a business or not, this means better cash flow while using your funds in a more useful manner if not invest for additional capital. Plus the fact that you can view updated transactions that is being recorded automatically, tracking your expenses becomes easier over cash transactions. Not to mention that it could also improve one’s spending habits, everything could be paperless as well since purchases, tracking and payment can be done online.
Nevertheless, as much as nobody wants to fall into bad debts, there are times that one can go overboard or encounter varying life dilemmas hindering the objective to practice better cash flow and management as well as maintain good credit standing. It may be due to financial difficulty arising from the sickness of the cardholder itself or from any immediate family member; job loss, death of the primary breadwinner; or maybe even brought by any natural calamities.
But hey, here’s the good news to all those who were trapped into the latter category!
The Credit Card Association of the Philippines:
Asia United Bank
Bank of Commerce
Bank of the Philippine Islands
China Banking Corporation
Eastwest Banking Corporation
Equicom Savings Bank
Metrobank Card Corporation
Philippine National Bank
SB Card Corporation
Standard Chartered Bank
Union Bank of the Philippines
collaborates with the Bangko Sentral ng Pilipinas (BSP) with the participation of BDO Unibank, Inc., and initiated a program that will allow them to restructure their existing debts. The Inter-Bank Debt Relief Program (IDRP) aims to help highly indebted and financially distressed (but well meaning) customers to get back on track towards responsible use of credit card (s).
CCAP Executive Director Alex Ilagan explained, “with the help of the Bangko Sentral ng Pilipinas (BSP), CCAP, and BDO Unibank, Inc., 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. It is part of CCAP’s mission to assist those who have inadvertently fallen into credit card debt, but have shown willingness and intention to pay the outstanding obligations with all the participating banks. The financial capacity including the income and expenses summary of the Debtor will be reviewed prior to enrolment of the account to the Program.”
CCAP’s IDRP Program Guidelines
Under the IDRP program, the repayment period can extend up to ten (10) years for severe cases of indebtedness, with as low as 1.5% per month or even lower depending on the cardholder’s profile, debt to income ratio and completion of documents required for the program. If found misused and abused, the participating banks may also have the option to disapprove customer’s application.
All the customer’s existing credit cards will be blocked or cancelled upon enrollment. Accordingly, any rebates or rewards earned will also be forfeited. In addition, while the accounts under the IDRP are not yet fully settled customers won’t be able to apply for a new credit facility with any of the participating banks. Understandably, those who enroll in the program likewise need to show a reasonable ability to pay the necessary amortization prior to being accepted.
Ilagan also clarified that “in order to make things more streamlined and convenient, customers may transact directly with a ‘one-stop-shop’ facility, courtesy of a lead bank to negotiate or to apply for debt restructuring of all outstanding obligations existing in other banks. The banks themselves will take charge of notifying all other program members of a customer’s inclusion in the program, with the lead bank acting as the main coordinator. For convenience, the customer may approach any of his or her credit card issuing banks to apply for the program, but the bank with the biggest debt exposure to the applicant will take on the responsibility as the lead bank.”
How to qualify?
All credit card accounts must be at least six months old, with an outstanding balance of at least P10,000 per card and total card obligations of at least P100, 000 for all cards. Acceptance into the program will be subject to certain restrictions and qualifications, as well as, submission of pertinent documents. Qualified customers, in compliance with their approved terms, may opt to issue post-dated checks at lower interest rate, or pay cash to each bank separately on the due date. To make it easy for the customer in the future, CCAP is now developing a centralized or single payment channel so customers can consolidate all payments in one check or one location in case of cash payments. This facility will be made available before the end of this year.
Moreover, customers are not allowed to apply on a selective basis only, and are required to disclose and include all credit cards owned with the participating banks. Once a customer applies for the program, all of his or her existing credit card accounts, whether delinquent or not, will be included. This will mean that he or she will no longer be able to use credit cards that are not yet delinquent until after the repayment schedule is completed. The cardholder’s name will also be reported to the Credit Bureau, and this will affect their ability to apply for new credit cards or new loans. Needless to say, these measures are intended to prevent customers from making a cash advance in one card to pay-off obligations in another. It will also eliminate possible abuse from customers who may be looking for a way to pay lower interest on their outstanding balance that are not yet past due.
“The spirit behind the IDRP is to rehabilitate and provide a second chance to financially distressed customers,” Ilagan noted. “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,” he concluded.
The IDRP will be officially launched this June and will initially cover credit card debts. It will eventually include unsecured personal loans within its scope.
Based on industry data, as of 2015 about P2.32 billion have been placed in individual restructuring programs of banks, representing 1.39 percent of the total industry receivables of P167.41 billion. Interest rates from the said accounts range from 0 percent to 3.00 percent with an average tenure of 48 months.
About the CCAP
The Credit Card Association of the Philippines (CCAP) is a professional organization comprised of 15 member card companies: Asia United Bank, Bank of Commerce, Bank of the Philippine Islands, Citibank, N.A., China Banking Corporation, Eastwest Banking Corporation, Equicom Savings Bank, HSBC, Maybank, Metrobank Card Corporation, Philippine National Bank, RCBC Bankard, SB Card Corporation, Standard Chartered Bank, and Union Bank of the Philippines.
The aim of the CCAP is to act as a mediator between the credit card industry, merchant establishments, and most importantly, the consumer. Its objective is to promote wider ownership and acceptance of credit cards as a safe, reliable and beneficial payment instrument. Ultimately, this will enhance purchasing power, thus contributing to the economic development of the country.
Part of CCAP’s mandate is to initiate measures for the protection of cardholders and merchants, as well as to encourage the responsible use of credit cards in the local, global, and e-commerce sphere. Likewise, CCAP aims to inform the public about credit management, foster discipline among consumers, and eventually guide the credit card industry towards self-regulation.
To achieve this, CCAP engages itself in cooperative and collaborative efforts with the government agencies such as the Bangko Sentral ng Pilipinas (BSP), the Department of Trade and Industry (DTI), and the Bureau of Internal Revenue (BIR); as well as law enforcement agencies and private organizations like the Bankers Association of the Philippines (BAP).
To know more about CCAP’s and IDRP Program, please visit www.ccap.net.ph