Guidelines on the Implementation of a One-Time Mandatory 60-Day Grace Period for All Loans under the Bayanihan to Recover As One Act

The Securities and Exchange Commission (SEC) and Bangko Sentral ng Pilipinas (BSP) issued separate guidelines to implement Section 4 (uu) of the Bayanihan to Recover as One Act (BARO) providing for a one-time 60-day grace period for payment of all existing, current, and outstanding loans falling due, or any part thereof, on or before 31 December 2020 (“Mandatory Grace Period”).

SEC

In the Notice dated 21 September 2020 , the SEC directed all financing companies (FCs), lending companies (LCs), and microfinance NGOs (MF-NGOs) under the supervision of the SEC Corporate Governance and Finance Department to implement the Mandatory Grace Period subject to the following guidelines:

1. The Mandatory Grace Period shall apply to each loan, whether the borrower has a single loan or multiple loans with the FC, LC, or MF-NGO.
2. FCs, LCs, and MF-NGOs shall not charge or apply interest on interest, penalties, fees, or other charges to future payments or amortizations of the borrowers during the Mandatory Grace Period. Furthermore, FCs, LCs, and MF-NGOs are prohibited from requiring their clients to waive the application of the provisions of the BARO. No waiver previously executed by borrowers covering payments falling due until 31 December 2020 shall be valid.
3. The accrued interest for the Mandatory Grace Period may be paid by the borrower on a staggered basis until 31 December 2020. Nonetheless, this shall not preclude the borrower from paying the accrued interest in full on the new due date.
4. The parties may agree on a grace period longer than 60 days, and/or the payment of accrued interest on a staggered basis beyond 31 December 2020.

BSP

In Memorandum No. M-2020-074 dated 28 September 2020, the BSP further clarified the effects of the Mandatory Grace Period on the covered institutions and the borrowers:

1. This BSP policy covers all BSP-supervised financial institutions (BSFIs) with lending operations and shall include banks, quasi-banks, non-stock savings and loan associations, credit card issuers, trust departments/corporations, pawnshops, and other credit granting entities.
2. Borrowers whose loan/s with principal and/or interest fall due between 15 September 2020 and 31 December 2020 shall be entitled to the Mandatory Grace Period, thus, extending the maturity of the said loans without incurring interest on interests, penalties, fees, or other charges. The parties, however, are not precluded from mutually agreeing to a grace period longer than 60 days.
3. The Mandatory Grace Period shall commence from the payment due date of the covered loans.
4. The Mandatory Grace Period shall apply to all loans including but not limited to salary, personal, housing, commercial, motor vehicle loans, amortizations, financial lease payments, and premium payments, and credit card payments.
5. Covered loans are further qualified as those existing, current, and outstanding as of 15 September 2020. This means that only loans in current status and not past due are covered by the Mandatory Grace Period under the BARO. Moreover, BSP clarified that existing loans refer to loans granted or credit card transactions including but not limited to purchases, cash advances, and balance transfers made prior to 15 September 2020. Credit card transactions made on and after 15 September 2020 shall not be covered by BARO and shall continue to incur interest or finance charges if not fully paid on or before its original due date.
6. Loan accounts that benefitted from the Mandatory Grace Period under Republic Act No. 11469 or the Bayanihan to Heal as One Act shall be covered by the Mandatory Grace Period under the BARO if the said loans are existing, current, and outstanding as of 15 September 2020. Similarly, loans that were restructured before 15 September 2020 shall be covered by BARO if considered current and performing as of 15 September 2020.
7. If a person has multiple loans, the grace period shall apply to each loan.
8. During the Mandatory Grace Period, covered institutions shall not impose interest on interest, penalties, fees, or other charges against the borrower for late payment or non-payment on due date. Moreover, covered institutions shall not charge nor apply the foregone interests on interests, penalties, fees, and other charges to future payments/amortizations of the borrowers.
9. The interest chargeable per installment period shall continue to accrue during the Mandatory Grace Period and shall be payable on the new date after the application of the grace period.
10. For post-dated checks issued for loan accounts and those with auto-debit or auto-deduct arrangements, the covered institutions shall coordinate with their clients and secure the clients’ consent to proceed with the arrangement. This does not preclude the borrowers from applying the Mandatory Grace Period.
11. Covered institutions shall not require their borrowers to waive the Mandatory Grace Period, but the grant of the Mandatory Grace Period by the covered institutions shall not preclude the borrowers from choosing not to avail of the said grace period and paying their obligations as they fall due.
12. Covered institutions that agree to further loan term extensions or restructuring shall be entitled to regulatory relief as may be determined by the BSP.

BSP may issue further directives to, or impose sanctions on, the BSFI and/or responsible persons of the BSFI such as directors, officers, and/or employees in relation to strict enforcement of this policy.

Click here to read SEC Notice dated 21 September 2020 and here to read BSP Memorandum No. M-2020-074 dated 28 September 2020 with the Implementing Rules and Regulations and Answers to the Frequently Asked Questions on the implementation of the mandatory grace period under the BARO.