New rulings tighten credit ceiling, profile

New credit card rulings to be issued by the central bank in May will not cover debt collection, but would tighten data on three main areas for credit card customers; income, age and the credit ceiling, a Bank Indonesia (BI) official says.

BI spokesman Difi A. Johansyah said Friday that by focusing on these three areas, the central bank aims to minimize potential bad debt, and ease aggressive bank marketing.

Difi said the central bank “has long been concerned with the aggressiveness of credit card [marketing] because many customers have complained”.

Banks in Indonesia market credit cards in malls, offices and by phone, often tempting, if not forcing, reluctant customers to own more than one card.

Although admitting the issuance of the ruling was triggered by the recent death of Irzen Octa, a Citibank customer who was allegedly beaten to death by Citibank debt collectors after complaining about what he thought was an inflated credit card bill, Difi said, “The rulings will go into three directions — credit ceilings, customer age and income,” .

“They will regulate customers to have adequate income and age to own a credit card and there will also be a maximum credit ceiling for customers depending on their income.”

The credit ceiling point will require customers to have a certain monthly minimum regional wage (UMR) to have a certain credit card limit, Difi said, without elaboration.

“The complete new rulings are still being processed by the payment system directorate. As soon as they are finished, it will be announced to the public,” he said.

There are currently no income requirements for credit card applicants, but previously, credit card limits are reportedly three times the minimum regional wage.

“Also, currently credit card applicants must be at least 21-year-old. With the new rulings, there will be a stricter age limit,” he explained.

Bank Indonesia (BI) Governor Darmin Nasution previously said that the current credit card regulations were “not detailed enough” to mitigate negative practices in the credit card industry.

“Credit cards were initially introduced as a payment tool, not for borrowing. Credit card regulations were previously loose to grow the industry. Now that it has grown, we will tighten the regulations,” Difi said, citing BI’s 2009 regulation on credit card activities.

The rulings, which will be out in a form of either BI regulation (PBI) or circular letter (SE), will not detail debt collection points, he added.

“We will still use the existing regulation, but as recommended by the House of Representatives, we will discuss about [debt collection] with the AKKI [credit issuer association],” he said.

The Indonesian Credit Card Association (AKKI) is currently outlining a code of conduct for its members, which comprise the nation’s major credit issuers. “The principles will be regulated by BI, while the detailed, operational rulings will be done by the AKKI,” BI Deputy Governor on payment Budi Rochadi said.

Earlier this month, House Commission XI overseeing financial affairs summoned BI, Citibank and the National Police over the debt collection fiasco that led to the death of Irzen, the former secretary-general of the National Unity Party (PPB).

The lawmakers recommended the central bank sharpen rulings on credit cards and debt collection to avoid violence.