Ceiling credit-card rate to drop to 12.5%

The consensus was that the ceiling interest rate for the revolving credit will be calculated this way: the interest rate for accommodation without collateral charged by the Central Bank of China (CBC) plus a markup of 9 percentage points. As the CBC rate now stands at 3.5 percent per annum, the ceiling interest rate for revolving credit will reach 12.5 percent per annum accordingly.

Lawmakers at the judiciary committee of the Legislative Yuan and chairman Sean Chen of the Cabinet-level Financial Supervisory Commission (FSC) reached the consensus following three hours of closed-door coordination meeting.

It seemed that the Executive Yuan has softened its stance on maintaining a ceiling interest rate for credit-card revolving loans at the level of 15.5 percent, instead of 12.5 percent set in an amendment to the Civil Code which already passed the first reading by the Judiciary Committee of the legislature.

With the consensus, Lawmaker Hsieh Kuo-liang of the ruling Kuomintang said, the amendment to Article 205 of the Civil Code, is expected to smoothly pass the second and third readings by the legislature today to become officially enacted. If so, people will be able to have their interest payment for revolving credit sharply slashed by the end of April, when banks in Taiwan are expected to reduce their ceiling interest rate for such credit to the uniform level of 12.5 percent from 20 percent or so.

Hsieh continued that another point of the consensus reached yesterday was that the maximum interest rates for private loans will be set at the CBC's interest rate for accommodation without collateral plus a markup of 12 percentage points. Now that the CBC rate stands at 3.5 percent, the ceiling interest rate for private loans won't be allowed to exceed 15.5 percent per annum.

Hsieh said that the ruling KMT has really done a good job by sharply reducing the ceiling interest rates for revolving credit-card loans and private loans.

Another KMT Lawmaker Wu Ching-chi said that the interest rate amendment will benefit more than 3 million credit-card holders in Taiwan,

Lawmaker Chiu Yi of the ruling party also noted that after the interest rate amendment is ratified, it will mark the arrival of a new era for consumer banking. For one thing, banks will have to adjust their management and marketing costs for credit card issuance, and for another thing, cardholders will no longer be in an absolutely disadvantageous position in dealing with banks.

Sean Chen of the FSC also noted that credit-card issuing banks can move to slash some unnecessary marketing costs and adjust their operating practice of using the credit cards as a lending tool.

In case banks continue to charge interest rates higher than the new ceiling limit after the revised Civil Code takes effect, the banks won't be entitled to retrieve excessive interest payment from their clients.

Subscribe to The China Post and save 25%. Click here

SharePrintEmail

Write a Comment

Terms

Enter your comments - 3000 characters max

Type in image code

Submit

 Receive China Post promos
 Respond to this email