Cash-advance cards spook officials

With Chinatrust Commercial Bank (中國信託) joining the crowded cash-advance card market yesterday, consumer advocates encouraged banks not to over-hype the popular personal loans.

"Borrowing money is not a practice to be encouraged," said Jason Lee (李鳳翱), vice chairman of the Consumers' Foundation (消基會). "Yet these days many banks just want to profit from people saying only good things about cash-advance cards."

He urged banks to be socially responsible and educate the public not to borrow unless they have the means to repay. That responsibility also involves not running exaggerated ads, he said.

One cash-advance card issuer recently ran TV ads stating that "it's OK to borrow," Lee said.

Traditionally, borrowing funds has been frowned upon in Taiwan.

"This is wrong," he said. "It sends the wrong message to teenagers and destroys the concept of saving money."

Television stations recently run countless ads that make cash-advance cards appear fun and exciting, offering lucky draws or freebies to stimulate usage. "They are actually pushing consumers to take on debt," Lee said.

The cards allow users to withdraw up to NT$600,000 from ATMs, while users are charged 18.25 percent annual interest as well as NT$100 for every transaction.

The cash-advance market is expanding, and major players are jumping on the bandwagon.

According to Michael Chang (張智銓), a senior vice president of Chintrust's personal financial planning department, last year the nation's cash-advance transactions hit NT$65 billion, and he estimates that figure will surge to NT$150 billion this year.

"Chintrust aims to gain 10 percent of the pie, or NT$15 billion in transactions within the next 12 months," Chang said.

Cash-advance services are especially helpful when users need cash quick, he said

Users can get the small loans in 30 minutes as long as they show a personal ID along with their business card or a financial statement.

Taking consumers' ability to pay into account, students are not allowed to use Chinstrust cash-advance cards.

"With the government suggesting card issuers tighten up regulations on young adults, we have decided not to issue cash-advance cards to students or people under 20 years of age, Chang said.

One official praised the plan to restrict card issuances.

"Banks should be more conservative in issuing loans ... the move not only protects them from bad loans but also protects young consumers from digging themselves into a financial hole," said Chiu Shu-chen (邱淑真), a section chief at the Bureau of Monetary Affairs.

But Lee said the public should avoid cash-advance services.

"Since the services is so easy and simple to access, consumers may get addicted to it," he said.