The Bangko Sentral ng Pilipinas (BSP) has issued another memo for banks and other lending institutions’ additional guidance and to clarify sections under the “Bayanihan To Recover As One” Act (BARO Act) on interbank loans and bank borrowings.
BSP Governor Benjamin E. Diokno, who signed Memorandum Order No. M-2020-074 on September 28, said all its supervised financial institutions (BSFIs) are required to post the additional rules and clarifications on their websites. Banks and non-banks are also directed to send their clients notices that should “clearly communicate details of the BSFIs implementation of the grace period,” said Diokno in the memo.
The new memo which covered banks, quasi-banks, credit card issuers, non-stock savings and loan institutions, trust departments of banks and trust corporations, and pawnshops, contained the implementing rules and regulations for the mandatory non-extendible 60-day grace period for loans that are existing, current and outstanding loans.
Not all BSFIs such as banks have informed their clients of the grace period and how it will be implemented, nor were clients informed that they may choose not to pay due amounts that fall on September 15 which is the effectivity date of the BARO Act or Bayanihan 2, to November 15 for example, to complete the 60-day grace period. Banks et al will not charge or apply foregone interest on interests, penalties, fees and other charges during this period.
In case a borrower has paid after September 15 because he or she was not informed of the adjusted due date, the BSP said banks or other lending institutions it supervise will have to reach out to the client and secure his or her consent to move the due date.
“BSFIs shall communicate with their clients and secure their consent to apply the mandatory one-time grace period on the next installment date,” said the BSP. Banks will also have to give clients enough time to reply to the request of consent. Banks will issue a disclosure that if no feedback is received given some time, they will proceed with the arrangement.
“In cases where the borrowers would signify the implementation of the mandatory one-time grace period for the payment received by the BSFI, the BSFI shall return the payment received to the borrower without charging interest on interests, penalties, fees and charges,” said the BSP.
On how Section 4 (uu) of the BARO Act will be applied, the BSP explained that the grace period will cover all existing, current and outstanding loans with principal and/or interest including amortizations, falling due from the effectivity of the BARO Act which is September 15 until December 31, 2020 without incurring interest on interests, penalties, fees, or other charges. The grace period however will not apply to interbank loans and bank borrowings.
The BARO Act, the BSP clarified, does not apply to all loan accounts but only to existing, current and outstanding loans as of September 15. Example of existing accounts or loans are purchases, credit card advances, balance transfers, or transactions via credit cards that are made before September 15.
Based on Section 4 (uu), the BSP said past due accounts are not covered.
“The application of the mandatory 60-day grace period … effectively moves the payment due dates of the entire loan,” said the BSP.
The BSP said the borrower may pay the principal and interest falling due on September 15 until December 31 “in full” at the end of the grace period, or on a staggered basis until December 31 this year. “Likewise the parties may agree to pay the principal and interest on staggered basis beyond December 31,” said the BSP. “For this purpose, accrued interest shall refer to interest that is due on the outstanding principal obligation but has not been paid yet by the borrower since the last loan payment made.”
In the case of credit card transactions, any transactions made on and after September 15 will not be covered by the BARO Act – still on Section 4 (uu) – and these transactions will continue to incur interest or finance charges if not fully paid on or before its original due date, said the BSP.