SEC urges firms to extend debt relief to clients

The Securities and Exchange Commission (SEC) has called on lenders under its supervision to consider debt relief packages to their clients and give them more breathing room as the domestic economy gradually reopens after more than two months of strict lockdown.Using moral suasion to lenders outside the banking system, the SEC seeks to help mobilize creditors to help hasten the country’s rehabilitation and recovery from the coronavirus pandemic.

The SEC issued on June 11 a notice that “strongly encouraged” lending companies, financing companies and microfinance nongovernmental organizations (NGOs) to consider lowering of interest rates, waiving or reducing penalties, charges and other fees, extending payment holiday, consolidating debt, restructuring loans to lengthen terms, and providing flexible payment schedules.Lenders may also develop and implement their own programs or schemes that will provide relief to their borrowers, in addition to the mandatory grace period required under Section 4(aa) of Republic Act No. 11469, or the Bayanihan to Heal As One Act, and its implementing rules and regulations (IRR), the corporate regulator said.Section 4(aa) of the Bayanihan law empowered President Duterte to implement a minimum 30-day grace period for the payment of all loans.

Under the IRR issued in April, all lenders—including nonbank entities under the supervision of the SEC—were required to grant an initial 30-day grace period to all loans with principal and interest falling due within the enhanced community quarantine (ECQ) period.The IRR provided the automatic extension of the grace period during the extension of the ECQ period. Accordingly, all financing companies, lending companies and microfinance NGOs were required to apply the mandatory grace period to all loans with principal and interest falling due between March 17 and May 31 this year.Aside from providing a grace period, all covered institutions were prohibited from imposing interest on interest, fees and other charges to future payments or amortizations. Borrowers were likewise given the option to pay the interest accrued during the grace period on a staggered basis over the remaining life of the loan.The SEC earlier reminded financing and lending companies to strictly comply with the Bayanihan law, its IRR and other applicable laws, rules and regulations, warning that any violation or noncompliance would be dealt with to the full extent of the law.

Lenders supervised by the Bangko Sentral ng Pilipinas have likewise been asked to go easy on their borrowers, especially the small and medium-sized enterprises facing liquidity constraints due to the pandemic.

Apart from banks, the institutions covered by the mandated loan moratorium include quasi-banks, nonstock savings and loan associations, credit card issuers, pawnshops and even state-owned housing and pension funds.

On postdated checks issued by borrowers to cover loan payments during the moratorium—a gray area in the implementing rules—these were covered by the moratorium as well. INQ