Dear Attorney,

I am writing on behalf of my sister, who is facing a challenging financial situation. She had an outstanding balance of PHP 18,000 on her credit card. However, due to the pandemic, she lost her job and could not keep up with her payments. The credit card company is now asking for PHP 27,000, and she is worried that if she cannot pay within the deadline, legal action might be taken against her.

Could you kindly clarify if the credit card company can file a case against her for non-payment, and what her rights and options are in such a situation? Any advice on how she might resolve this issue legally and ethically would be greatly appreciated.

Sincerely,
A Concerned Sibling

Legal Analysis: Non-Payment of Credit Card Debt in the Philippines

The non-payment of credit card debts is a common concern, particularly in challenging economic circumstances like the COVID-19 pandemic. Below is a thorough analysis of the legal implications, rights, and potential remedies available in this scenario.

1. Nature of Credit Card Debt and Contractual Obligations

A credit card debt arises from a contractual agreement between the cardholder and the credit card issuer. The terms and conditions of the cardholder agreement specify the rights and obligations of both parties, including the payment of balances, interest rates, penalties, and other charges.

In the case described, the original debt was PHP 18,000, but due to interest and penalties, it has escalated to PHP 27,000. Under Philippine law, the creditor has the right to demand payment for the full outstanding amount, as long as the charges are within the limits set by law and the agreement.

2. Can the Credit Card Company File a Case for Non-Payment?

Yes, but only under certain conditions. Here are the possible legal actions:

A. Filing a Civil Case for Collection of Sum of Money:
The most common recourse for a credit card company is to file a civil case to collect the debt. This would involve proving the following:

The existence of the debt (e.g., through credit card statements or signed agreements).
The cardholder’s failure to pay despite proper notice.

The court may then order the debtor to settle the amount owed, including interest and penalties, subject to legal limits.

B. Criminal Liability for Credit Card Fraud (But Not Non-Payment):
Under Republic Act No. 8484, or the Access Devices Regulation Act of 1998, a person may face criminal charges if they use a credit card fraudulently. Examples include:

Providing false information to obtain a credit card.
Using a revoked or cancelled card.
Refusing to pay for charges incurred with fraudulent intent.

However, mere inability to pay does not constitute a criminal offense. The Constitution of the Philippines explicitly prohibits imprisonment for debt under Article III, Section 20 of the 1987 Constitution, which states:
"No person shall be imprisoned for debt or non-payment of a poll tax."

This means your sister cannot be jailed simply for failing to pay her credit card debt.

3. Rights of the Debtor

Debtors have specific rights under Philippine law to protect them from harassment and unfair practices by creditors. These include:

A. Protection Against Harassment:
The BSP Circular No. 702 (Series of 2010) and the rules of the Bangko Sentral ng Pilipinas (BSP) prohibit credit card companies from engaging in abusive collection practices, such as:

Calling at unreasonable hours (e.g., late at night or early morning).
Using obscene or threatening language.
Harassing family members or other third parties.

Debtors can report such abuses to the BSP or file a complaint with the proper regulatory body.

B. Right to Information:
The debtor has the right to receive clear and accurate information about the outstanding balance, interest rates, and penalties.

C. Negotiation for Amicable Settlement:
Many credit card companies are willing to negotiate repayment terms, especially for individuals who have suffered financial hardship. Options include:

Restructuring the debt into smaller, manageable installments.
Requesting a waiver or reduction of penalties.
Seeking longer repayment periods.

4. Remedies and Options for the Debtor

To address the issue, your sister may consider the following steps:

A. Contact the Creditor:
She should reach out to the credit card issuer to explain her situation and request a restructuring of the debt. Many financial institutions have pandemic relief programs or offer debt restructuring plans.

B. Review the Validity of the Charges:
She should review the credit card statements to ensure the charges, interest, and penalties comply with the terms of the agreement and BSP regulations. Excessive or unjustified charges may be contested.

C. Seek Legal Assistance:
If the credit card company pursues legal action, your sister should consult a lawyer to ensure her rights are protected. A lawyer can also help negotiate a settlement or defend against unjust claims.

D. Explore Debt Relief Programs:
Several non-governmental organizations (NGOs) and legal aid centers offer assistance to individuals facing debt-related issues. These organizations can provide advice and representation.

5. Preventive Measures and Best Practices

For individuals facing similar situations, here are some preventive measures and best practices:

A. Understand the Terms of Credit:
Always read and understand the terms of the credit card agreement, including the interest rates, penalties, and repayment conditions.

B. Budget Responsibly:
Credit cards should be used within one’s means, and payments should be made on time to avoid compounding interest and penalties.

C. Communicate Early:
If financial difficulties arise, it is essential to communicate with the creditor early to explore possible solutions.

6. Practical Advice for the Concerned Sibling

As a concerned sibling, you can support your sister by helping her:

Organize her financial records, including credit card statements and correspondence with the creditor.
Draft a letter or email to the credit card company requesting debt restructuring or a payment plan.
Accompany her to consultations with a lawyer or financial advisor.

Conclusion

While your sister’s financial challenges are undoubtedly difficult, it is important to note that non-payment of credit card debt is not a criminal offense in the Philippines. The credit card company may file a civil case to collect the outstanding balance, but your sister has rights and options to address the issue, including negotiating for more favorable terms or contesting unreasonable charges.

Encourage her to act promptly and seek professional advice to resolve the matter amicably and legally. With proper guidance and support, she can navigate this challenge effectively and begin rebuilding her financial stability.