Mandatory Grace Period for Lending and Finance Companies in the Philippines – 7 April 2020

The SEC has issued Implementing Rules and Regulations of Section 4(aa) of Republic Act (RA) No. 11469 (IRR). RA No. 11469 is known as the “Bayanihan to Heal as One” Act.

The IRR are directed specifically at finance and lending companies in the Philippines as well as microfinance NGOs.

The IRR makes it mandatory for these institutions to defer the collection of Borrower payments, including principle and interest, that fall due within the Enhanced Community Quarantine (ECQ) period (i.e. 17 March to 12 April), for a 30-day period.

Below are the key points for consideration under the IRR.

Implementing Rules and Regulations of Section 4(aa) of Republic Act (RA) No. 11469

The SEC has issued Implementing Rules and Regulations of Section 4(aa) of Republic Act (RA) No. 11469.

The IRR makes it mandatory for lending and finance companies and microfinance NGOs in the Philippines to defer the collection of payments, principle and interest, that fall due during the ECQ period (i.e. 17 March to 12 April), for a 30-day period.

Key points of information:

• Why have the IRR been implemented? To align with the power of the President (under the Bayanihan to Heal as One Act) to ensure the availability of credit to the productive sectors of the economy through measures such as lowering the effective lending rates of interest and reserve requirements of lending institutions. The measures under the IRR are also to “promote and protect the collective interests of all Filipinos in these challenging times”.

• What institutions are covered under the IRR? “Covered Institutions” coversall lenders in the Philippines, including (but not limited to) banks, quasi-banks, non-stock savings and loan associations, credit card issuers, pawn shops and other credit granting financial institutions under the supervision of the Bangko Sentral ng Pilipinas, the SEC or the CDA. The Government SIS, SSS and Pag-IBIG systems are also included as Covered Institutions.

• What does the Mandatory Grace Period mean? Borrowers that have loans with the principle or interest falling due within the ECQ period (i.e. 17 March to 12 April) are entitled to a 30-day Grace Period on payment without incurring interest on interest, penalties, fees and other charges.

• Can the Grace Period be extended? Yes. The Mandatory Grace Period will be automatically extended if the ECQ period is extended by the President beyond 12 April.

• What about interest on future payments? Covered Institutions are prohibited from imposing interest on interest, fees and/or other charges during the 30-day Grace Period on future payments or amortizations of the Borrowers.

• Can the Grace Period be waived? Covered Institutions are prohibited from requiring Borrowers to waive the requirements under the 30-day Grace Period. Waivers that were previously executed by Borrowers which cover payments falling due during the Grace Period will also be invalid. However, if Borrowers wish to pay any of their obligations that fall due during the ECQ, they are entitled to do so.

• What if a Borrower has multiple loans with the same lender? The 30-day Mandatory Grace Period shall apply to each individual loan.

• What about interest accrued during the 30 day Grace Period? Interest accrued during the 30 day Grace Period can be paid by the Borrower on a staggered basis over the remaining life of the loan. However, interest accrued can also be paid in full on a particular date after the Grace Period ends if the Borrower so wishes.

• When do the IRR take effect? The IRR were effective immediately upon publication.

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