CardX braces for regulatory change raising customer debt repayment 3%

CardX, a credit card service provider operating under SCB X Group, anticipates a potential issue with customer compliance linked to an upcoming regulatory change from the Bank of Thailand.

The central bank presently permits credit card users to repay their debt at a minimum rate of 5% of the overall credit balance each month, a measure introduced to aid consumers impacted by the economic fallout from the pandemic, reported Bangkok Post.

Sarut Ruttanaporn, the Chief Executive of CardX, shared that this rate is due to increase to 8% in 2024, before reverting to the standard rate of 10% the following year.

Of CardX’s two million credit cardholders, 8%, or 160,000 accounts, currently repay their debt at the 5% minimum rate.

Although the 2024 increase to 8% might seem minor, Sarut recognizes that some customers could struggle with this higher payment rate. Consequently, CardX has advised its customers to prepare for this change.

“Some clients are unable to pay at the normal rate, so the company would help support them on debt restructuring. However, we do acknowledge that some clients who show weak debt repayment ability could be classified as non-performing loans [NPLs] and the company needs to continue to manage the bad debt.”

Sarut also highlighted that the Bank of Thailand has not yet announced the maximum interest rate for the credit card service, even though a timeline has been set for the increase in the minimum payment rate.

Due to the pandemic, the central bank lowered the highest rate chargeable for credit cards from 18% annually to the current 16%. This reduction has led to a decrease in the income margin for the business.

Furthermore, Sarut mentioned that CardX intends to work in conjunction with the central bank to tackle the country’s growing household debt, which includes the persistent debt (PD) of personal loan products.

The company is prepared to reduce interest rates for clients applying for the loan assistance programme. Nevertheless, the company’s proportion of PD, as per the central bank’s definition, is under 5% of the total personal loan customer portfolio.

As per the central bank’s PD definition for ongoing loan schemes, PD borrowers are those who have been in continuous debt for three years, while severe PD borrowers are those who have been in debt continuously for five years, possessing a minimum monthly income of 20,000 baht at banks and 10,000 baht at non-banks.

Sarut further disclosed that CardX is currently transferring its credit card and personal loan portfolio from Siam Commercial Bank to the new entity under SCB X Group. This transition is expected to be finalized next year. With the new digital infrastructure-based organisation, CardX anticipates positive earnings by 2025, Sarut added.