Amendments to Circular No. 398 governing credit card operations of banks and subsidiary credit card companies

n Bo"gfio Sentoof og Qtl'ilttroo OFFICE OF THE GOVERNOR Glrcuhr No' 45L- Series ot 2OO4 Pursuant to Monetary Board Resolution Nos. 1278 and 1328 dated 09 September 2O04 and 16 September 2004, respectively, Circular No. 398, Series of 2003 goveming the credit card operations of banks and subsidiary credit card companies is hereby amended as follons: Section 1. Secfion 4337Q shall be added to the Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) so as to inorporate the provisions of Circular No. 398, Series of 2003, as amended. Section 2. The second paragraph of Sections X320 and 4301N Crcdit Cad Operations; General Policy of the Manual of Regulations for Banks (MORB) and the MORNBFI, respectively, is hereby amended to read as follovus: 'Towards this end, the rules and regulations that shall govem the credit card operations of banks and subsidiarylAFFlLlATE cr€dit card companies, aligned with global best practices, are hereby issued, as bllors:" Section 3. Banks and/or their subsidiary credit card companies as mentioned under Subsecs. X32O.2, X320.3, X32O.4, X320.9, X320.10, X32O.11 and X320.13 of the MORB and Subsecs.4301N.2, 4301N.3, 4301N.4,4301N.9, 4301N.10, 4301N.11, and 4301N.13 of the MORNBFI orwhenever mentioned in Circular No. 398 shall refer to banks and/or their subsidiary/AFFILIATE credit card companies. Section 4 ltem C, Section 3 of Gircular No. 398, Series of 2003 on Appendix 18 - Guidelines in ldentiffing and Monitoring Problem Loans and Other Risk Assets and Setting up of Allowance for Probable Losses (Appendix to Sec. X302) of the MORB shall form part of Appendix of N Regulations of the MORNBFI. For purposes of said Appendix _, the provisions on the classification of loans and allowance for probable losses under Appendix Q-10 of the MORNBFI shallapply. Section 5. The folloring definitions of subsidiary and affiliate are hereby added to Definition of Terme under Subs6cs. X320.1 and 4301N.1 of the MORB and the MORNBFI, respectively: PnrunrunlAprNG MnrRrnc. Bnrusnruc PANATAG A. Mabini St., Malate 1004 Manila, Philippines o Trunkline (632)524-70-11 o URl:www.bsp.gov.ph o e-mail: [email protected]

n Pry2d.4 fl 'Subsidiarf refers to a corporation or firm more than fifty percent (50yo) of the outstanding voting stock of wtrictr is directly or indircc{ly oumed, ontrolled or held with the po^,er to vote by a bank or other financial institution. g) 'Affiliate" refers to an entity linked direc'tly or indirectly to a bnk or other financiaf institution thrcugh any one or a ambindion of any of the following: 1) Ownership, @ntrol or power to vote, whether by permanent u temqnry proxy or voting trust, or other similar @nttacts, by a bank or other frnancial instiffiion of at leasf 1Oo/o or more of the outstanding voting stoc-k of the entity, or vice-versa; 2l Interlocking dircctorship or officership, excefl in cases involving independent directors as deftned under existing regulations; 3) Common stockholders orning at leasf ten perceft (10o/o) of the outstianding voting stock of each financial institution and the entity; or 4) Management oontlac't or any arrangement granting pq,ver to the bank or other financial institution to direcil or cause the direc'tion of management and policies of the entity, or vice-versa. Section 6. ltem (k) is hereby added to Subsecs.,X320.4 and 4301N.4 Information to be disclosed of the MORB and MORNBFI, respectively, to read, as bllouls: k) For tansactions made in fureign cunencie andlor outside the Philippines, br dual curency acounts (peso and dollar billings), as urell as payments made by credit cardholders in any curency other than the billing curency: the application of payments; the manner of conversion from the tnansac'tion cunency and payment cunency to Philippine pesoe or billing curency; definition or general description of verifiable blended exchange/conversion rate (e.9., MASTERCARD and/or VISA Intemational rates on the day the item was process€d/posted to the billing stratement, plus mark-up, if any) including onversion commission; andlor other curency conversion charges and osts arising firom the purchase by the card company of foreign currency to settle the ostome/s transactions shall also be disclosed. Section 7.Subsecs. X32O.14 of the MORB and 4301N.14 of the MORNBFI are hereby renumbered as Subsecs. X320.15 and 4301N.15, respdively, and nen provisions are hereby provided under Subsecs. X32O-14 and 4301N.14 to read, as bllows:

A Pqe3of 4 Unfair Gollection Practices. Banks, subsidiary/affiliate credit card companies, collection agencies, oounsels and other agents may resort to all reasonable and legally permissible means to collect amounts due them under the credit card agreement: Provided, That in the exercise of their rights and perbrmance of duties, they must observe good faith and reasonable onduct and reftain fiom engaging in unscrupulous or untoward acts. Wthout limiting the general application of the foregoing, the follorving conduct is a violation of this Subsection: a) the use or threat of violence or other criminal means to harm the physical person, rcputation, or prcperty of any person; b) the use of obsoenities, insufts, or ptofiane language which amount to a criminal acf or ofbnse under applicable laws; c) disdosure of the names of credit cardholders wtto allegedly refuse to pay debts, except as allorved under Subsec. X320.9 and 4301N.9; d) threat to take any ac{ion that cannot legally be traken; e) communicating or threat to communicate to any person credit information s'hlch is knorn to be false, including fiailure to ommunicate that a debt is being disputed; 0 any false representation or deceptive means to collect orand attempt to collec{ any debt or to obtain information conceming a cardholder; g) making contract at unreasonablefinconvenient times or hours which shall be defined as contact befure 6:00 A.M. or after 10:00 P.M., unless the account is past due br more than sixty (60) days or the cardholder has given express permission or said times are the only reasonable or convenient opportunities for ontd- Section 8. The following Genenal Ledger accounts shall be added to the Manualof Accounts br banks and non-banks: 1. Restructtrred Loans - Credit Card Receivables (GL ACCT CODE) This represents credit card receivables that have been renegotiated or modffied to either lengthen or poetpone the original scfieduled installment payments, or substlantially alter the original terms and mnditions of the credit card agreement due to q€dit quality @ncems. This account does not indude receivables whose original terms and conditions are modified at the instance of the cardholder but wfrich have not shourn weaknesse9deterioration at the time of rcnegotiation: Prcvided, That any subsequent renegotiation or modification of the terms and onditions of repayment shall be deemed restructuring wtrictr shall warant the classification and reporting under this acount of the ooncemed rcoeivable.

n Pqe4o/-4 Subcontolacount 2. Past Due Reshrctured Loans - Crcdit Card Receivables (GL ACCT CODE) This rcpresents restructured credit card receivables which are onsidered past due under existing rulee and regulations. The loan shall rcmain in this amunt until fully paid, anangements arc brmalized for its renewaU rcstructuring or collection case has been filed in court. 3. ltems in Litiqation - Restruciured Loans - Credit Card Receivables (GL ACCT CODE) This represents restructured credit card receivables br wfticfr ollection cases have been filed in ourt. The loan shall remain in this amunt during the pendency of the proceedings, until full payment, restructuring of the obligation, or suctr other disposition is made as urould cause such proceedings to @ase. All expenses incuned incidental to the litigation shall be chalged to operations and lodged under "Litigation/Assets Acquired Expenses' aoount. Conesponding memorandum entries for the expenses shall be made on the individual subsidiary ledger of the account concemed. This Gircular shall take efiect fifteen (15) days bllowing its publicatkcn either in the Offcial Gazefte or in a ne\icpaper of genenal circulation. FoR rHE MOryErAYOeao: dl vqt ARTANDO L. SUhATOS OffcerJn4harge *S'n 'T"--'-T----'- zo"