By Atty. Julius Gregory B. Delgado
SIXTY (60)-DAY GRACE PERIOD ON LOAN PAYMENTS UNDER BAYANIHAN TO RECOVER AS ONE ACT
My friend consulted me over a text message sent by his bank regarding his car loan. The message states that under Republic Act No. 11394, otherwise known as the Bayanihan to Recover as One Act, he is entitled to a sixty (60)-day grace period from his monthly amortizations. Ordinarily, a person given a reprieve would be delighted but my friend was flabbergasted. The reason being is that, while the two months’ worth of amortization would be paid at the end of the loan period effectively extending the same, he was assessed an additional interest on these amortizations. It should be noted that these amortizations already carry the interests spread over the loan period.
Section 4 (uu) of the Bayanihan to Recover as One Act mandates banks, quasi-banks, non-stock savings and loan association, pawnshops, cooperatives, financing companies, lending companies, credit card companies, real estate developers, insurance companies providing in-house financing for goods and properties purchased, asset and liabilities including Government Service Insurance System (GSIS), the Social Security System (SSS), and the Home Development Mutual Fund (HMDF) or Pag-IBIG Fund to provide a non-extendible, one-time 60-day mandatory grace period for the payment of all existing, current and outstanding loans falling due, or any part thereof, on or before 31 December 2020, without incurring interest on interests, penalties, fees, or other charges.
The Bayanihan to Recover as One became effective on 15 September 2020. The Bangko Sentral ng Pilipinas, being the regulator of all banks and lending institutions, issued Memorandum No. M-2020-074 dated 28 September 2020, which will serve as the Implementing Rules and Regulations of Section 4 (uu) of the Bayanihan to Recover as One Act.
Under Section 4.01, Rule IV of BSP Memorandum No. M-2020-074, “loans shall include, but is not limited to, salary, personal, housing, commercial, and motor vehicle loans, amortizations, financial lease payments and premium payments, as well as credit card payments.” Under Section 5.02, Rule V of BSP Memorandum No. M-2020-074, “during the mandatory grace period, covered institutions shall not impose interest on interests, penalties, fees, or other charges representing charges against the borrower for late payment or non-payment on due date.” Under Section
Moreover, under 5.03, Rule V of BSP Memorandum No. M-2020-074, the borrower may pay the principal and accrued interest on a staggered basis until 31 December 2020, or on another date as may be agreed by both parties. Hence, in the case of my friend whose loan is about to end in December of next year, the bank imposed on him that the loan period will be extended until February of 2022 as the two (2) months wherein he will not be paying his monthly amortizations, i.e., October and November 2020, will be tucked at the end of his loan period, i.e., January and February 2022. It would have been fine with my friend where it not for the interest on accrued interest which is prohibited by law. My friend also asserts that he was not consulted and was just imposed by the bank (in a text message). It should be noted that under Section 3.03, Rule III of BSP, it is if borrowers are not precluded “from choosing not to avail of the said grace period and paying their obligations as they fall due.” Those with similar predicament as that of my friend are encouraged to contact and discuss this matter with their banks.
However, the Bangko Sentral ng Pilipinas issued an earlier Memorandum No. M-2020-074 providing for additional guidance and clarification on the applicability of Section 4 (uu) of the Bayanihan to Recover as One Act. In Section 3.03 thereof, a borrower may opt not to avail of the said 60-day grace period and may pay his amortizations as they fall due:
“Section 3.03. Prohibition on waivers.
“Covered Institutions are prohibited from requiring their clients to waive the application of the mandatory one-time 60-day grace period under Section 4 (uu) of the “Bayanihan to Recover as One Act.” No waiver previously executed by borrowers covering payments falling due on or before December 31, 2020 shall be valid. Nonetheless, the grant of the grace period by Covered Institutions under Section 4 (uu) of the “Bayanihan to Recover as One Act” shall not preclude the borrowers from choosing not to avail of the said grace period and paying their obligations as they fall due.”
Interpreting these provisions, in your amortizations from 15 September 2020, the effectivity of Section 4 (uu) of Bayanihan to Recover as One, and until 31 December 2020, your two (2) months’ worth of amortization (with interest already) may be paid at the end of the loan period, which under the law, the maturity is extended, or you may pay the two (2) months amortization on a staggered basis. But the bank cannot impose interest on the interest as it is prohibited. Also, if the borrower does not consent or does not wish to avail of the 60-day period, then he may pay the amortizations as they fall due.
Best regards,
Greg