A major issue that emerged here last year was the credit card crisis. In the last few years many people have obtained credit cards for the first time, and the result has been widespread abuse and a huge rise in bad loans. Now the government is considering a cap on credit card interest rates.

The ministry of justice yesterday said it planned to propose capping rates on credit card loans at 8 percentage points above the average savings rate – a step that would lower rates from 20 per cent at present to about 12 per cent.

Consumer lending operations at many Taiwanese banks have slipped into the red during the past few months after some placed rapid expansion above risk management in a fight for market share.

The largest lenders in the sector, Taishin Bank and Chinatrust Bank, wrote off 27 per cent and 15 per cent respectively of their card loans in January.

The ministry is not guaranteed to win the approval of the cabinet and the legislature for the proposed amendments. But the proposals indicate that the government is starting to lean towards the type of intervention that has been strongly advocated by lawmakers, as public pressure mounts for the government to rescue defaulting debtors.

Banks and financial experts are fiercely opposed to the idea.

Lin Chung-cheng, a commissioner at the Financial Supervisory Commission, Taiwan’s financial regulator, said that, if implemented, the proposed interest rate cap would force banks to retreat from unsecured consumer lending and drive 1.5m borrowers into the arms of loan sharks.


The FSC estimates the number of heavily indebted consumers in Taiwan at 500,000, with an average debt burden of T$500,000 (US$15,400, €12,900, £8,900) each.

Nobody is benefiting from the current situation — banks aren’t making money, and consumers are deeply in debt. And the issue has now become a political football. At the pan-Blue rally on Sunday, one consumer complaint was the credit card situation.