Sat, Sep 09, 2006 - Page 12 News List

Banks speak out against nixing of bonus schemes

By Jackie Lin  /  STAFF REPORTER

Banks voiced unanimous opposition yesterday to the nation's financial regulator's proposed plan to revoke the bonus point collection scheme for newly issued credit cards, saying it was an unnecessary and micromanaging measure.

"As the Financial Supervisory Commission has imposed many restrictions on credit card applications, we don't think it's necessary to deprive users of the benefit," said an official with a leading credit card issuer, on condition of anonymity.

Since the financial sector was hid hard by the consumer bad loan crisis in the second half of last year, the commission and the legislature have tightened regulations on the credit card business to curb further card abuse.

They have demanded that consumers submit personal financial documents when applying for credit cards, and increased the minimum payments for each month's new card sales from the original 2 percent to 10 percent to prevent outstanding debts from snowballing.

The commission has also forbidden financial institutions from setting up booths outside banks to hawk financial products, or from excessive incentives such as lavish gifts to successful credit card applicants.

"With so many restrictions [already], credit cards will become too boring if bonus points are removed," the official said.

The official added that the point collection scheme merely serves as a loyalty program for users, and has scant connection with spiking consumer debt, as few consumers apply for credit cards based on a certain bank's bonus points.

The ongoing dispute dates to the end of last month, when the commission submitted its draft amendments to the Regulations Governing Institutions Engaging In Credit Card Business (信用卡業務機構管理辦法) to the Bank Association of the ROC (銀行公會) for further discussions and feedback.

Among the proposed changes, one clause stipulates that banks should cease awarding bonus points on newly issued credit cards.

The bank association is scheduled to discuss the controversial clause in a committee meeting next week and will submit their final opinions to the financial regulator at the end of the month.

The FSC will then convene public hearings on the issue before finalizing the draft amendment, according to the bank association.

One association committee member said that none of the banks supported the proposed change, saying that the commission should not interfere with their promotional strategies, many of which are also common overseas.

Richard Yang (楊鎧榮), vice president for consumer banking at Chinatrust Commercial Bank (中國信託商銀), the nation's largest credit card issuer, said that offering bonus points does not necessarily stimulate card users' consumption.

"It's more like a rebate program, boosting consumer loyalty to the issuing bank. We really hope that the scheme will continue to work," he said.

FSC chairman Shih Jun-ji (施俊吉) said last week that the plan is still under discussion and that any ideas could be raised at this stage in the process.

He said that the ideas were brought up with the intention of correcting the authority's loose supervision of the card market and banks' imprudent issuance of credit cards.

The regulator hoped to make policies that can strengthen the consumer banking sector, Shih added.

According to the commission's statistics, the total revolving credit balance for credit cards stood at NT$403.2 billion (US$12.3 billion) in July, with an average bad loan ratio of 2.92 percent.

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