BSP eases rule on restructuring credit-card loans

The Bangko Sentral ng Pilipinas has made it easier for individual borrowers who are finding difficulty paying bank loans to restructure their debts.

The BSP last week issued Circular 760, which states that an individual borrower applying for debt restructuring no longer has to have a co-maker just to have his application approved.

Nestor Espenilla Jr., deputy governor of the central bank, said the circular was meant to ease the process of debt restructuring of individual loans, led by those related to credit-card borrowings.

Out of all types of loans extended by banks, credit-card loans have the most number of defaults. The BSP said, however, that these were still within manageable levels.

He said that easing the rule on debt restructuring would allow banks to easily collect payments for debts that were otherwise difficult to do if the borrower indeed had a limited capacity to pay.

“This circular was issued because credit-card companies said they are having problems in collecting payments. They said they wanted to restructure the debts [of some of their individual borrowers], but could not do so because of the absence of a co-maker,” Espenilla told reporters Friday.

Some individual borrowers who are having difficulty paying their debts, but are eager to pay under easier terms, also find it difficult looking for a co-maker. This was the reason why the BSP decided to issue the circular, Espenilla said.

With the issuance of the circular, a concern was raised that the easing of the requirement for debt restructuring might prompt some individual borrowers to default on their loans and simply apply for a restructuring.

Espenilla, however, expressed confidence that the easing of the requirement for debt restructuring would not be abused and would not lead to an increase in loan defaults.

“Our banks have a good credit policy. We [BSP] do not think this circular would cause nonperforming loans [NPLs] to reach uncomfortable levels. To date, NPLs remain manageable,” Espenilla said.

“This is also why financial literacy is important. We have to teach borrowers to be responsible that once you use your credit card, you have to pay it,” he added.

Documents from the BSP showed that the combined outstanding consumer loans extended by thrift and universal and commercial banks amounted to P563.8 billion as of end-March, about 17 percent up from a year earlier. Of the amount, P38.4 billion, or 6.8 percent, was non-performing.

Consumer loans include housing, automotive, personal and credit-card loans.

Outstanding credit-card loans alone amounted to P159.1 billion as of the end of the first quarter, up nearly 13 percent from last year. Of the outstanding credit-card loans, about 11 percent were nonperforming.