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BI Plans Stricter Controls on Credit Cards
Dion Bisara | November 05, 2011

Bank Indonesia governor Darmin Nasution says that among other controls necessary he wants to clamp down on the number of cards people can hold to prevent over-borrowing. (JG Photo/Jurnasyanto Sukarno) Bank Indonesia governor Darmin Nasution says that among other controls necessary he wants to clamp down on the number of cards people can hold to prevent over-borrowing. (JG Photo/Jurnasyanto Sukarno)
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DrDez
12:14pm Nov 6, 2011

Cars too Marcel

A distant relative makes a very good living picking up almost new defaulted cars and bikes - his 'trade' has increased 500% in the last two years on teh back of repossessions

BB - 100% correct - and they send around debt collectors who according to said relative are often policemen 'moonlighting' - recall there was to be new regulations following the death of the debt ridden lawmaker.. Ask yourself so what has changed

We used to provide interest free loans of up to 3x monthly salary by the way of advances (once per year) - however in 2007 we stopped when we found 3 borrowers where taking the money then lending it on short term loans around the town at 25%

Another example of preying on the weak I guess. 6 months later we had the usual mass application (to pay for the trip home) despite everyone being notified officially it would not happen 6 months earlier - We relented but have never done it since

blightyboy
7:14am Nov 6, 2011

Its probably too late. I would suspect there are many people running their own personal ponzi scheme and juggling card debt over numerous accounts. Look around, it happened all over the West and culminated in sub prime loans and disaster across the Globe.

What I would love to know is how the lenders go about getting their money from defaulters when there is no way to do it through the courts and no database to track people down???

charyza
1:11pm Nov 5, 2011

good to hear!

marceldeb
10:38am Nov 5, 2011

@DrDez why bikes, reducing the car loans would help reducing traffic too

padt
9:33am Nov 5, 2011

Who am I to complain about anything in glorious Indonesia! My credit card from a Indonesian bank was up for renewal and I needed a replacement card. They eventually issued a replacement and when it arrived after a long delay they had spelt my name incorrectly on it. So, having endured one long delay I was forced to endure another - this time - 5 months. It took them 5 bloody months to issue me with another card with my name spelt correctly on it. 5 months! They are lazy, stupid and incompetent and haven't a clue about customer service. And their attitude to customers is - "Stuff off! There are millions of people in this country. What is it to us if we lose one customer? We don't need you - you need us."

And of course that attitude is rampant across the board. Try building or renovating a house and see what the attitude of the contractors is? Well, I guess it comes of living in a place where law and order is breaking down and the courts are corrupt so you can't get justice.

In a bid to prevent a credit-card crisis similar to those that have hit many developed nations, Bank Indonesia is set to put in place stricter controls on the ubiquitous plastic.

Central bank governor Darmin Nasution said on Friday that it was necessary to impose controls — such as more stringent creditworthiness requirements and interest rate caps — before a problem arose.

“We don’t want the credit-card business to boom while regulations remain loose,” he said.

He cited as an example of a troubling policy the fact that some banks were issuing credit cards without regard to customers’ ability to repay, encouraging people to take on more debt than they could afford.

“We will set some limits. For example, on the number of credit cards one can have, I think two will be enough,” Darmin said, adding that the move was intended to protect both customers and banks.

Ronald Waas, BI’s director of payment systems, said the central bank was considering instituting minimum age and income requirements for a person to be eligible for a credit card.

BI’s draft regulations set the minimum eligibility age at 21, or 18 if married, and require a minimum monthly income of Rp 3 million ($340).

In addition, only customers with a monthly income of more than Rp 10 million will be eligible to hold more than two credit cards, through it would in part depend on an individual bank’s policy. Customers would also face a maximum credit limit of three times their monthly income.

When it comes to credit-card issuers, Darmin said, there are too many banks charging monthly interest rates of 3.5 percent to 3.75 percent, “which is too high.” On an annual basis, that can equal more than 40 percent, or almost four times the average prime lending rate of 12 percent per year.

Ronald said the credit card interest rate would be capped at 3 percent per month and banks would only be allowed to charge interest on the principal, not on other costs such as late payment fees or stamp duties.

The new regulations will be included in the revision of a 2009 Bank Indonesia regulation (PBI) on electronic card payment devices (APMK) that is being finalized and will be issued before the end of the year.

“It will be effective from January 1, 2013,” Ronald said.

“We just want to return the credit card back to its first and foremost function as a means for payment, and then financing. Not the other way around.”

According to the Indonesian Credit Card Association (AKKI), there were 14.4 million credit cards in circulation as of last month, compared with 13 million at the end of last year. Each month, more than 100,000 new cards on average are issued.

In September, credit card transactions hit Rp 15.2 trillion, up 9.4 percent from last year.

Further Coverage

Editorial >A10