Unions: New credit card rules belated, confusing

The BDDK is looking to set a limit for credit card debt of TL 1,000 for consumers with a monthly income of TL 1,000 and expects lenders to monitor income levels regularly.

Unions: New credit card rules belated, confusing

World Bulletin/News Desk

As Turkey's banking watchdog prepares to tighten rules on credit card use, consumer unions say the anticipated set of new arrangements begs questions as to how they can be applied in a healthy manner. The unions also criticized the authorities for being too late in addressing the credit card debt issue, a growing problem in Turkey.

The Banking Regulation and Supervision Agency (BDDK) said last week that it was working on new rules that make it harder for consumers to pile up more credit card debt than they can afford. Observers argue the anticipated rules, which oblige credit card holders to repay more of their debts each month, were motivated by Prime Minister Recep Tayyip Erdoğan's earlier call on consumer to shun credit cards. Erdoğan accused banks of locking people into poverty with excessive fees. Credit card usage, however, skyrocketed during his party's 10-year rule. The number of cards in circulation skyrocketed to 56.4 million in May of this year from 15.7 million in 2002, data from Turkey's Interbank Card Center (BKM) show.

The BDDK is looking to set a limit for credit card debt of TL 1,000 for consumers with a monthly income of TL 1,000 and expects lenders to monitor income levels regularly.

These new steps concern millions of credit card users in Turkey who find themselves in a difficult position to resolve their outstanding debts with banks.

The BDDK said last week that 46 percent of all non-performing consumer loans in June were credit card debt.

Consumer unions say introducing limits on spending with credit cards as a solution is too late, adding the problem is much deeper than believed. They find it unlikely that the measures will put a brake on growth in credit card lending.

Consumer Protection Association (TÜKODER) Chairwoman Şükran Eroğlu said on Tuesday that the new rules will put more card users in trouble, suggesting that the watchdog focus on dealing with more urgent problems such as bank seizures due to outstanding debts. Eroğlu criticized the BDDK for ignoring how banks allow people to spend more than they can afford to repay with credit cards. “The state should provide loans with favorable repayment conditions to consumers with huge credit card debts. … We can discuss lowering the credit card spending limits later.”

According to Turkish Consumers' Union Vice President Hatice Saadet Kalyoncu, an average of 70 percent of all consumers in Turkey hold credit cards and the problem is too big to solve with spending limits. “I do not think this measure will be effective in the mid-term. … The BDDK should have consulted with us before taking such steps,” she said.

In addition, under the new rules, for newly issued credit cards, the minimum repayment ratio will be increased to 40 percent, up from 25 percent. The minimum monthly repayment for outstanding credit card debt will be increased to 30 percent of the total amount for debts up to TL 15,000 and 35 percent for debts up to TL 20,000 from a flat 25 percent currently.

The banking industry must submit its views on the planned measures by Aug. 26. The BDDK said it would then make any necessary amendments before the changes are put into effect.  

Güncelleme Tarihi: 22 Ağustos 2013, 10:59