Senate President Pro Tempore Jinggoy Ejercito Estrada has called for a ban on the issuance of unsolicited pre-approved credit cards and stricter penalties for financial institutions that violate the regulation.
Estrada, who recently filed Senate Bill No. 2952, also known as the Pre-Approved Credit Card Prohibition Act, highlighted that despite existing regulations set by the Bangko Sentral ng Pilipinas (BSP) under Circulars Nos. 702 (2010) and 845 (2014), some banks and credit card companies continue to issue pre-approved cards without consumer consent. This practice, he noted, exposes individuals to financial risks and potential fraud.
“This is an unacceptable practice, particularly when consumers are unaware that they have been issued a credit card without their consent. For individuals struggling with financial discipline, this could result in a debt trap. Banks and credit card companies must uphold consumer rights and ensure that financial decisions are made with explicit consent,” Estrada asserted.
Key provisions of the bill
The proposed legislation aims to reinforce consumer protection by making it unlawful for banks and financial institutions to:
- Issue pre-approved credit cards without a formal application, written request, or supporting documents from the consumer.
- Send unsolicited supplementary credit cards or introduce new features to an existing card without the cardholder’s consent.
- Make unsolicited calls offering credit cards as promotional rewards for using other financial services.
- Automatically issue credit cards to depositors with good standing without a formal request.
- Send credit cards via mail that are deemed activated upon receipt unless explicitly confirmed by the recipient.
- Offer free credit cards as incentives for availing of other financial products or services.
Additionally, the bill prohibits credit card collection agents from using unethical or harassing methods to demand payments from consumers who unknowingly received pre-approved credit cards.
Proposed penalties for violators
To enforce compliance, Estrada’s bill outlines the following penalties for credit card issuers that breach the law:
- First offense: Censure and a fine of PHP 300,000 for responsible directors and officers.
- Second offense: Suspension from BSP credit facilities and a fine of PHP 500,000.
- Third offense: Revocation of the issuer’s license and a fine of PHP 800,000.
Estrada emphasized that credit card providers must prove that a consumer has read and agreed to the terms and conditions before issuing a credit card. If this requirement is not met, the consumer cannot be held liable for any financial obligations related to the card.
“This measure ensures that credit card issuers are held accountable for their actions, fostering ethical business practices and financial transparency,” he stated.
Alignment with consumer protection laws
The bill is in line with Article XVI, Section 9 of the 1987 Constitution, which mandates consumer protection against trade malpractices. It also aligns with Republic Act No. 7394, or the Consumer Act of the Philippines, which safeguards consumers from deceptive, unfair, and exploitative sales practices.
Estrada’s proposed legislation underscores the importance of consumer rights, financial accountability, and the need to curb predatory lending practices in the credit card industry.