Credit Card Receivables
Cagamas has recently launched a new scheme on 30 January
2003 to purchase credit card receivables (CCR) from the financial
institutions. The CCR can be sold based on a specified Cagamas
rate for a price review period of 3 to 5 years. The CCR are
purchased at their book value i.e. the principal balance outstanding
on a date which is closest to the purchase date but not earlier
than the end of the month preceding the purchase date.
The selling institutions sell the CCR but not the underlying
accounts to Cagamas. The receivables assigned are from accounts
designated by the selling institutions.
Due to the revolving nature of the credit card accounts,
the selling institutions are required to sell to Cagamas newly
charged receivables generated by the designated accounts subsequent
to the purchase date. This is to ensure that the aggregate
principal balance of the designated accounts should at least
be equal to the book value. As such, the monthly principal
collections from the designated accounts will not be remitted
to Cagamas but will be used to purchase new receivables until
the review date. The selling institutions remit to Cagamas,
the Cagamas instalment which comprises interest only
on a monthly basis until the review date.
The selling institutions will hold all payments made by their
customers in an account held in trust for Cagamas.
In the event that the CCR and or designated accounts
have become defective, the selling institutions are required
to repurchase the defective accounts and offer to sell to
Cagamas an equivalent amount of CCR from
new credit card accounts as replacements for the receivables
repurchased on a periodic basis.
At the end of the contract review period, the selling institutions have
the option to roll-over the contract for a further review
period at the then prevailing Cagamas rate or to repurchase
the CCR sold to Cagamas.
Eligibility Criteria of Credit Card
Accounts
Cagamas purchases receivables generated only from eligible credit
card accounts. To be eligible, the accounts must:
- be related to receivables in connection with the utilisation
of credit or charge cards;
- be serviced for at least 12 months;
- not be more than 60 days past the due date at the time
of sale;
- not be closed, terminated or written off;
- not be assigned, pledged or sold to any other parties;
and
- comply with all other criteria specified in the Cagamas
Guide (Credit Card Receivables).
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