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September 26, 2017

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Gov't won't lower top rates for credit cards

The government's latest decision is not to interfere with interest rates on credit and cash card debts. But it also ordered the banks to stop consigning business solicitation and debt collections to local financing firms, beginning on April 1.

The policy adopted at an inter-department coordination meeting on Tuesday night nixed a plan by the Ministry of Justice (MOJ) to draft new rules to lower ceiling interest rates.

Officials said banks are still free to set interest rates, but they encouraged the banks to set flexible interest rates for different customers based on creditworthiness and financial risk.

They said that banks and holders of credit cards or cash cards should negotiate on repayment terms and interest rates. Since some lawmakers are still pushing to slash the maximum interest rate on loans to 10 or 12 percent from the current 20 percent per annum, officials said they will continue the dialogue with legislators.

Another major decision made by officials was to temporarily stop the current practice of banks of hiring finance companies to promote credit cards and consumer loans.

Government agencies will harshly crack down on those who take violent action when collecting debts, the officials said.

But lawmakers of the opposition Kuomintang and the People First Party criticized the government for siding with financial conglomerates at the expense of ordinary people who are burdened with exorbitant rates.

They said that the government should no longer ignore the serious problems faced by the rising number of suicides among "card slaves," who often don't even have jobs.

Tseng Kuo-lei, an official at the Financial Supervisory Commission supervising banking operations, said banks are planning to work out a credit rating system to levy differential rates on different customers.

He said that as many as 15,000 credit card debtors have reached agreement with their banks on rescheduling repayments, for a combined amount of NT$25 billion.

The latest survey by the ROC Bankers Association showed that as many as 76 percent of credit and cash card holders used their cards for necessities.

But 65 percent of the interviewees admitted that they had used portions of the card loans to wine and dine or buy products bearing famous names.

Some 17 percent had spent money at department stores, followed by visiting clubs or karaoke facilities, nine percent. Other money was spent on watches, jewelry, clothing, and travel.

Tseng said the SFC will train instructors to give lectures to students and people at community gatherings to offer tips on financial management and using credit and cash cards properly.

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