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Thai Credit-Card Firms Fear Proposed Cap on Interest-Rate Spreads.
Byline: Suphaphan Plengmaneepun
Nov. 8--The proposed legal limit on interest rate spreads could lead to the closure of some credit card providers, according to Visa International
"It is impossible for credit card businesses to be profitable with a spread of less than five percentage points as their costs are much higher than those of other financial institutions. If the law is not amended, some operators will be forced to close while the overall industry will be affected adversely," said Somboon Krobteerawong, country manager (Thailand and Indochina), Visa International (Asia-Pacific) Ltd.
Some operators might have to raise their fees but it would be difficult for small operators to do so. "Poorer quality services will definitely follow."
Mr Somboon said that both the Thai Bankers' Association and the Credit Card Club were monitoring the situation and trying to find a way out. One possible solution was to exempt the credit card business from the spread limit requirement. "Unlike normal loans, the credit card business has no supporting collateral."
Mr Somboon said that in the very competitive credit card business, market mechanisms should be allowed to determine the interest rate spreads.
"The fact that a foreign bank charges over 20 percent on late repayments of spending done through credit cards but achieves the highest growth for its credit card business clearly demonstrates that the interest rate is not an important factor in this business," said ...
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