THE Monetary Authority Brunei Darussalam (AMBD) has reduced the rate of interest applicable to credit cards from the current rate of two per cent, to not more than 1.5 per cent on the total outstanding amount. For Islamic institutions, the administration fee on credit cards shall also be not more than 1.5 per cent per month on the total outstanding.

Credit card users will get a 0.5 per cent deduction in interest from outstanding payments to financial institutions beginning February 1, 2012, as part of an updated directive from the government. The new directive, issued by the AMBD on January 20, 2012, emphasises on "cost transparency", where both conventional banks and Islamic institutions are required to facilitate comparisons and informed decisions by cardholders.

"The credit card issuing banks are required to provide a Product Disclosure Sheet that contains key information like card's features, fees charged and obligations of the cardholders etc. The implications of meeting only the minimum and partial repayments shall be prominently displayed and alerts communicated to the cardholders," the statement said.

The AMBD also requires banks at the end of the year, to create customised information on how long it will take for cardholders to fully pay off the outstanding balance and the total interest costs for the cardholder making the minimum payment only shall be issued to those who are seen to be accumulating large credit card outstandings as a result of the minimum payment being made each month.

Finally, credit card issuing banks are required to be transparent about the basis of interest computation for their credit card customers. "How interest is computed on credit card outstanding shall be stated very clearly in their terms and conditions, and on the reverse of the monthly statement," the AMBD added.

In December 2009, the Ministry of Finance issued the first directive on credit cards to curb excessive spending under which customers could be issued a credit card only by a bank with which he/she keeps his payroll account. If he/she chooses to maintain a credit card account with another bank, he/she is required to keep a fixed deposit where a card will be issued equivalent to the amount placed in the fixed deposit.

The regulations previously issued will continue to be in force, where the minimum age of the principal cardholder is 21-years-old, and the minimum age for supplementary cardholders is 18.

The minimum gross salary to obtain a card is at least $500 a month, where those who earn between $500 and $999 will have their credit limited to one month of their salary, whilst those who have a monthly income between $1,000 and $9,999 will receive a credit limit of twice their salary.

In the event where the customer does not meet the requirement of the regulators, they are to pay in full the outstanding balance, or their credit liability should be settled within a maximum period of 36 months through the conversion of the balance to a credit card loan outside the covenants of the Personal Loan Directive, or through the continuation of the liability as a credit card outstanding.

In regard to that, AMBD said that the bank may offer credit card loans to customers who are unable to assign their salaries to the credit card issuing bank on a case-by-case basis, and extensions over the 36 month period should also be on a strict case-by-case basis where it "should not exceed 60 months and shall not extend beyond January 2017".The Brunei Times