Loans Under the Bayanihan to Heal As One Act
With the widespread effect of the Coronavirus Disease 2019 (COVID-19), the Philippine government has recognized the need to undertake a program for recovery and rehabilitation, partner with the private sector and other stakeholders, and promote and protect the collective interests of all Filipinos. Republic Act. No. 11469 or the The Bayanihan to Heal As One Act was enacted by the Congress following the issuance of the Presidential Proclamation No. 922, s. 2020, which declared a State of Public Health Emergency throughout the Philippines due to COVID-19 and raised the Code Alert System for COVID-19 to Code Red Sublevel Two (2).
The Enhanced Community Quarantine (ECQ) period, initially set from 17 March 2020 to 12 April 2020 as cited in Proclamation No. 929, was extended to 30 April 2020 upon the approval by the President of Inter-Agency Task Force for the Management of Emerging Infectious Diseases (IATF-EID) Resolution No. 20.
This article will discuss how the Bayanihan to Heal As One Act promotes lenient treatment towards the payment of loans. The law does this by imposing certain obligations on lenders that correspond to beneficial grants to borrowers.
What are the Covered Institutions?
All lenders, including but not limited to banks, quasi-banks, non-stock savings and loan associations, credit card issuers, pawnshops and other credit granting financial institutions under the supervision of the Bangko Sentral ng Pilipinas (BSP), Securities and Exchange Commission (SEC), and Cooperative Development Authority, public or private, including the GSIS, SSS, and Pag-ibig Fund, are obligated to observe certain loan-related rules under the law.
Mandatory Grace Period
The law specifically directs the aforementioned covered institutions to implement a minimum of a thirty (30)-day grace period for the payment of all loans with principal and/or interest falling due within the period of the ECQ without incurring interests, penalties, fees, or other charges. The initial 30-day grace period shall automatically be extended if the ECQ period is extended by the President.
As provided in the IRR, all covered institutions shall not charge or apply interest on interest, fees and charges during the 30-day grace period to future payments/amortizations of individuals, households, micro, small and medium enterprises (MSMEs), and corporate borrowers.
Individuals and other entities with multiple loans shall likewise be given the minimum thirty (30)-day grace period for every loan. The grace period shall apply to each loan.
Prohibition on Waivers
The IRR also provides that covered institutions are prohibited from requiring their clients to waive the application of the provisions of the Bayanihan to Heal as One Act, including among others, the mandatory 30-day grace period. Moreover, no waiver which was previously executed by borrowers covering payments falling due during the ECQ period shall be valid. Nonetheless, the grant of grace period by the covered institutions shall not prevent the borrowers from paying their obligations as they fall due during the ECQ period should they so desire.
Effect of Grace Period
As earlier mentioned, borrowers whose loan/s with principal and/or interest falling due within the ECQ Period shall be entitled to avail of the 30-day grace period without incurring interest on interest, penalties, fees, and other charges. No additional documentary stamp tax (DST) shall be imposed as a consequence of the relief so granted. Further, no DST shall be imposed on credit extensions and credit restructuring, micro-lending including those obtained from pawnshops and extensions thereof during the ECQ period.
The accrued interest for the 30-day grace period may be paid by the borrower on a staggered basis over the remaining life of the loan. Nonetheless, this shall not preclude the borrower from paying the accrued interest in full on the new date following the application of the 30-day grace period or extended grace period, as the case may be.
Violations of the IRR shall be subject to the appropriate penalties set forth in the Bayanihan to Heal as One Act as, as well as existing laws, rules and regulations.