Atty. Nazzar R. Luis

July 23, 1981 Atty. Nazzar R. Luis 5049 Filmore St., Palanan Makati, Metro Manila Dear Atty. Luis: Your letter of June 9, 1981 advances the view that credit card operations may be considered a form of factoring or receivables financing since entities engaged in this business extend credit facilities by factoring receivables from establishments where credit card holders buy goods on credit. In view of this, you request opinion on whether or not a financing company can engage in credit card operations. LibLex A distinction should be made between factoring of receivables by a financing company from the operation of an entity engaged in credit card business. In the former, the financing company purchases the manufacturer's or dealer's receivables and assumes all the risks and expense of collection, without recourse to the seller for credit losses. What it gets is the difference between the value of the receivable purchased and the net amount paid by it for such purchase or assignment plus other rates and charges allowed under the implementing rules and regulations of R. A. 5980. In the latter, the credit card holder pays only a fee to be entitled to a card and each purchase he makes is payable within two-months period without interest. He is charged an interest only on unpaid bills within that period or in case of default by the cardholder in the payment of his bills but no additional charges are imposed on him. What the credit card issuer gets is the difference between the value of the receivable purchased and the net amount paid by it for such purchase. Anent your query, a financing company may engage in the credit card business as secondary purpose, provided that it is so authorized in its articles of incorporation and provided further, that the rates and charges collected under R.A. 5980 and its implementing rules and regulations are not imposed on the credit cardholder. Please be guided accordingly. cdll Very truly yours, (SGD.) ROSARIO N. LOPEZ Director Corporate and Legal Department