Credit card firms urge BOT to clarify terms of DSI's interest-rate proposal
CREDIT-CARD and personal-loan providers have asked the Bank of Thailand to discuss with the Department of Special Investigation (DSI) the proposed new Interest Rate Act, which is creating confusion for them.
The DSI said on Tuesday that it was proposing that the Justice Ministry revoke the outdated law and replace it with a new version that provides harsher penalties against lenders charging borrowers more than 15-per-cent interest.
The DSI noted that the interest rate would cover fees and service charges related to debt collection. The new law would also apply to credit-card operators in the financial system, not just non-financial institutions.
Thakorn Piyapan, managing director of Krungsri Consumer, |a leading credit-card company under Bank of Ayudhya, said credit-card operators were under the jurisdiction of the Bank of Thailand, which allows operators to charge their borrowers 20 per cent for credit-card debt and 28 per cent for personal loans. To avoid confusion, the DSI should talk with the BOT about the interest rates because the central bank allows rates high enough to cover the providers’ risks, he said.
“As an operator, we will do whatever we must to comply with the regulator. But if the interest rate of 15 per cent includes fees and debt-collection expenses, the operators will be affected,” he said.
Onanong Udomkantong, executive vice president of CIMB Thai Bank, said the DSI proposal should not cover banks because banks come under the Commercial Bank Act and their interest rates are regulated by the BOT.
New act ‘would make it tough’
Pranaya Nithananon, vice president for the credit card business at Krungthai Card (KTC), said credit-card companies were supposed to run their business under the BOT’s regulations.
The company is ready to comply with any new regulations that are launched. However, the DSI’s proposal for a rate of no more than 15 per cent, to cover fees and any expenses, would make the credit-card business tougher.
“We have to follow the matter again to see if it will affect the business, because it is unclear whether this law would cover the banking industry,” she said.
KTC is focusing intently on high-end credit-card users who spend lavishly on dining and hotels.
In the first five months, spending on dining grew by 17 per cent year on year to Bt2 billion. The company expects spending on dining will grow at least 30 per cent this year.
Dining alone accounts for 5 |per cent of total KTC credit-card spending. Diners spend about Bt1,300 per head.
The company partners with premium restaurants in offering attractive promotions to boost spending by high-end credit-card holders, whom KTC defines as people with a monthly income of Bt50,000 or more.
Spending on travel and leisure with KTC cards in the first five months climbed 17 per cent to Bt1.7 billion. KTC expects this spending to pick up by 18-20 per cent this year, said Prim Panyasereeporn, vice president for travel and leisure marketing.
The tax deduction for travel expenses encourages Thais to increase spending on trips. Spending on travel and leisure of KTC high-end credit-card holders is about Bt13,000, regarded as high compared to other categories.
