An estimated 3.3 million credit and cash cardholders could be forced to turn to loan sharks if the limit for interest on revolving credit is slashed, economists said yesterday at a forum.
Their remarks came after the legislature’s proposal to cap the rates for credit cards and cash cards at 12.5 percent passed its first reading last Thursday, while the Cabinet on Monday proposed capping the rates at 15.5 percent.
UNPROFITABLE
Hwang Dar-yeh (黃達業), a professor of finance at National Taiwan University (NTU), said legislators believed the measure would help those struggling to make ends meet, but their proposal would in fact lead banks to give up customers by making the credit card business unprofitable.
If this happened, international rating agencies would eventually lower their evaluations of the stability of the nation’s financial sector and business environment, Hwang said.
JOB LOSSES
More importantly, if banks decided to eliminate their consumer finance departments, between 10,000 and 20,000 workers could lose their jobs, he said, pushing the jobless rate up 0.5 percentage points.
Lin Chien-fu (林建甫), a professor of economics at NTU, said the government needed to seek professional opinions in determining the rate.
“Setting a price ceiling will lead to extra demand. When this demand can’t be satisfied, these customers will only be able to turn to loan sharks,” Lin said, adding that this was a problem legislators could not ignore.
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