Reducing operating costs would give domestic credit and cash card issuers some room to lower their interest rates on revolving credit, the Financial Supervisory Commission (FSC) said yesterday as it released the results of a study into the cost structure of uncollateralized loans granted by these lenders.
“Some credit card issuers have incurred operating costs that are too high and should be brought under control soon,” Lin Tung-liang (林棟樑), deputy director of the commission’s banking bureau, told a media briefing.
The commission’s study found that, among the nation’s top 10 credit card issuers, funding costs accounted for an average of just 11.23 percent of their total cost for unsecured loans or late payments, while operating costs averaged 50.35 percent and risk cost averaged 38.42 percent, the commission said in a press release.
Six of the credit card issuers have an operating cost of more than 50.35 percent, Lin said.
He urged these six lenders to lower their operating costs, which he described as “manageable.”
The study found that, among the top three cash card issuers, funding cost averaged 13.2 percent of their total cost in granting unsecured loans, while operating cost averaged 20.39 percent and risk cost averaged 66.39 percent.
Lin said that cash card issuers’ risk cost was in line with the commission’s expectations and was not something issuers could manage.
He declined to say if the study justified the commission’s plan to lower the maximum interest rate on revolving credit to 9 percentage points above the central bank’s short-term lending rate.
With the central bank’s short-term lending rate at 3.5 percent, the revolving credit rate cap would be 12.5 percent.
However, Lin said it seemed possible for both credit and cash card issuers to lower interest rates on revolving payments or unsecured loans.
The commission yesterday also unveiled plans to tighten regulations on uncollateralized credit card lending.
The commission is mulling measures, to be reviewed and finalized by the Cabinet’s Consumer Protection Commission, to cap the amount of unsecured loans issuers can grant to cardholders.
The commission will also propose disallowing card issuers from extending debts and liabilities owed by any cardholders to supplementary cardholders, such as family members or relatives, Lin said.
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