Turkish Watchdog Lays Down New Credit Card Rules To Decrease Debt
Turkey officials are enforcing new measures for credit cards to help mitigate consumer debt.
The Prime Minister of Turkey, Tayyip Erdogan, has strongly condemned the use of credit card because of the country’s alarming debt problems. The Hurriyet Daily News reported that in June 2013, 46 percent of all non-performing consumer loan debt in Turkey were from credit card and personal debt. In the same month, it was reported that loan debt amounted to 680,000 Turkish liras, compared to the 822,000 liras accumulated from all of 2012. Banking watchdog of Turkey, BDDK, is taking action and announced new policies designed to limit credit card use and regain control.
A few weeks back, Prime Minister Erdogan made a public announcement, reprimanding Turkish banks for charging high fees and allegedly targeting “poor” consumers. The BDDK revealed new measures to address these issues, and make it more difficult for consumers to pile up more credit card debt than they can realistically afford to pay back.
The BDDK is enforcing credit card limitations for consumers. Customers with an income of 1,000 liras or less per month will be given stricter credit limits. Newer credit card issuance will be obliged with an increased minimum payment amount, jumping from 25 percent to 40 percent. Additionally, credit lenders will be asked to review consumer income levels on a regular basis.
New measures will request that customers more debt per month. The new minimum for monthly credit card debt payments will increase by 30 percent for debts of 15,000 liras and over, and increase by 35 percent for consumer debts exceeding 20,000 liras (compared to the flat 25 percent currently required).
Turkish government officials expect that many consumers with high debt may struggle with the higher payback amounts. However, new policies requests that banks in Turkey put aside more money to cover non-performing loans, which is estimated to set back annual profits back by 2 billion liras. Turkish lenders must put away 10 percent of profits as a contingency plan for the expected increased number of customers who will not be able to meet higher repayment requirements.
Turkey’s banking institutions have until August 26 of this year to submit feedback on the government’s proposal. The BDDK announced that after this deadline, they would make the necessary changes into the proposal before making it official.