The new regulations on credit card limits set by the banking watchdog will cause great majority of cards in use to be cancelled because of limits above the new rules, says an association head. Turkey’s Consumers Association (TÜDER) has warned that 50 million of 57 million credit cards currently in use could be cancelled after the new regulations concerning credit card limits set by the banking watchdog (BDDK) came into force.
The BDDK has announced new regulations which would bring about a series of stricter rules on the use of credit cards, just after Turkish Deputy Prime Minister Ali Babacan launched the government’s economic outlook for the mid-term, giving many details of the new rules.
The card limit for people applying for a credit card will not be permitted to exceed twice the amount of their monthly income in the first year of ownership; then, the limit will increase up to a maximum of four times the income in the following years, according to the new rules.
However, the new regulations do not make reference to the credit cards currently being used, TÜDER President Aydın Ağaoğlu said yesterday.
“50 million of 57 million credit cards will be obliged to be canceled from the beginning of this limit regulation. Because the people did installment shopping and they obtained high limits without questioning their income documents,” he said.
Consumers, markets and banks in question
Ağaoğlu said the consumers, markets and banks would be negatively affected. The consumers, who had become used to living with high limits, would be shocked by the debt spiral without their cards and they could be subject to levies, he said. Also, after the cards were canceled, the markets would suffer from shock stagnancy, he noted. The banks took place on the third side of the issue, he said, adding that after the banks’ interest and commission income coming from credit cards fell, they would look for ways to impose new fees on the consumers and it would reflect negatively on the consumers. Ağaoğlu also pointed out that the consumers whose credit cards were canceled would have to pay cash and it would raise the informal economy, which would cause a loss in the state’s tax income. “We couldn’t understand what this regulation is ruling about currently using credit cards,” he said.
The new regulations say the rules on announcement of income do not affect existing card-holders and they do not need to submit their income certificates to their banks. They do, however, need to do this when they ask for a raise on their card limits. Their limits cannot exceed four-fold of their incomes as well. Ağaoğlu stated that if the banks would increase the limit up to a maximum of four-fold of the income, they have to be responsible of the consumers’ debt.
Some dramatic changes have also been made in the rules regarding the cases of people unable to pay their debts. If people cannot pay their minimum payment three times successively, their card will be temporarily closed both to “cash advance” and spending. Such cards will not be reopened until all of the debts are paid.