Cagayan Rep. Jack Enrile lauded the Monetary Board decision to disallow banks from charging "flat" interest rates on loans, a press release from Congress said.
The new policy is a victory for the public that will boost initiatives aimed at promoting consumer protection and financial reform in the country’s banking sector, Enrile said.
Enrile, who has been leading calls to end banks' unfair practices like the collection of excessive interest rates from consumers, said the MB’s Board's Resolution No. 1018 only validates his earlier claims that banks have been making hefty profits from excessive interest rates they charge to consumers.
The MB approved Resolution No. 1018 that prohibits banks from using the so-called "flat" interest rates and other methods that seek to enhance the marketability of banks' loan products but misleads the public about the true cost of their borrowings, the press release said.
The Bangko Sentral ng Pilipinas said the common practice of banks to use "flat" rates and tuck in hidden costs misleadingly feature a lower contractual interest rate in the computation of consumers' loan payments.
Enrile is author of House Bill No. 4819 or the Credit Access and Protection Reform Act of 2011 which seeks to protect credit card holders from exorbitant fees and interest rates collected by credit card companies in the country, the press release said.
This decision to end a common – albeit unfair – practice among banks to charge excessive interest rates and other hidden charges on hapless consumers is a very welcome development in our efforts to clean up the banking industry, he said.
This answers our push for the BSP to put into place a firm policy that promotes consumer protection simply by disallowing banks from charging excessive interest rates on loans, Enrile said.
Under the new rules, banks are required to charge interest on the outstanding balance only of a loan at the beginning of an interest period. BSP said the new policy takes effect on July 1, 2012.
With the new MB policy in place, the BSP should also start looking into the exorbitant interest rates being interest rates and other fees collected by credit card companies, Enrile said.
"With this new policy now in place, the logical next step for the BSP is to review the interest rates being charged by credit card companies which has long placed the consuming public at a disadvantage," Enrile said.*