The Financial Supervisory Commission (FSC) yesterday said domestic credit card issuers have agreed to lower revolving interest rates for some cardholders and offer debt payment solutions to help restore credit ratings.
The commission made the announcement after a meeting on Friday last week with credit card issuers and following a two-month inspection of lender operations to ensure fair and reasonable pricing.
“All credit card issuers agree to cut revolving interest rates to 16 percent [from 20 percent] on customers who have been paying interest regularly for the past year,” the commission said.
The measure is expected to benefit more than 3.5 million cardholders beginning in October, after banks complete computer system adjustments, the commission said.
FSC Chairman William Tseng (曾銘宗) said in February that the commission would carry out an inspection of the nation’s 33 credit card issuers amid mounting complaints that some charge unreasonably high revolving interest rates regardless of applicants’ credit profiles.
The probe sought to determine how lenders arrive at their pricing policies and why they generally charge interest rates between 18 and 20 percent on a large proportion of customers, at odds with the principle of risk discrimination, Tseng said, adding that issuers with unfair policies may have their consumer lending programs suspended.
Meanwhile, opposition lawmakers have proposed amending laws to cap borrowing costs at 16 percent.
The commission does not take action against credit card issuers, but asks them to help indebted cardholders who maintain good payment practices to draw up payment schedules to ease interest burdens.
Banks should help at least 20 percent of cardholders enter payment programs by the end of this year, the commission said, adding that it will consider outcomes regarding this goal when evaluating lenders’ applications for new business.
To boost debt payment, lenders might lower credit restoration requirements, the commission said.
Debtors may apply to restore partial credit once they begin paying down their debt, as opposed to having to make six regular debt payments to qualify for the application, the regulator said.
In addition, the commission raises the minimum installment amount to 5 percent of the spending, from the present range between 2 and 5 percent, in a continued bid to guide the use of credit cards as a payment tool rather than a borrowing platform.
The requirement is to take effect on July 1, but will not affect existing credit card debts, the commission said.
Cash remains the favorite payment method in Taiwan, accounting for 80 percent of transactions, much higher than 50 percent in Hong Kong, 20 percent in South Korea and 15 percent in China, Visa Taiwan country manager Macro Ma (麻少華) said.