QuestionsQuestions (BSP Circular No. 886)
To adopt guidelines for salary-based general-purpose consumption loans and to amend certain provisions in the Manual of Regulations for Banks (MORB) and the Manual of Regulations for Non-Bank Financial Institutions (MORNBFI), with a focus on sound credit standards and fair consumer practices.
The Monetary Board approved the guidelines through Resolution No. 1380 dated 27 August 2015.
It provides revised provisions under “Policies on Salary-Based General-Purpose Consumption Loans,” including a new Statement of Policy and subsections on definition, credit granting, consumer protection, and sanctions.
Unsecured loans for broad consumption purposes granted to individuals mainly based on regular salary, pension, or other fixed compensation, where repayment comes from future cash flows through salary deductions, debits from the borrower’s deposit account, mobile payments, pay-through collections, over-the-counter payments, or other agreed payment arrangements.
They may include credit accommodations for education, hospitalization, emergency, travel, household, and other personal consumption needs.
Credit cards, motor vehicles, and other personal loans that are already covered by other existing applicable regulations are excluded.
No. The Circular requires that policies be consistent with best practices and sound credit processes, including comprehensive assessment of creditworthiness; loans should not be reliant on mere formula-based granting.
It must be prudently assessed using reasonable estimates of total personal and household indebtedness and the disposable income available for family and personal needs after considering debt servicing.
The original loan term shall not exceed 3 years, but may have longer maturity in meritorious cases provided that in no case shall maturity exceed 5 years.
No renewal shall be granted without re-assessing borrowing capacity and establishing continuing creditworthiness. Renewal is also not allowed without payment of accrued interest receivable and substantial reduction in principal.
The FI taking out the loan(s) must ensure the loan from the originating FI has been fully settled, and must institute adequate controls such as (1) directly releasing the loan proceeds to the FI where the loan will be taken out and (2) obtaining a copy of the official receipt evidencing full settlement.
FIs must strictly adhere to BSP regulations on Financial Consumer Protection, specifically Part Ten (Consumer Protection) of the Manual of Regulations for Banks and Part 4 of the Regulations Governing Non-Stock Savings and Loan Associations (S Regulations).
The Monetary Board may impose sanctions on the FI and/or its Board, directors, and officers, proportionate to the gravity/seriousness of the offense, in cases of persistent non-observance of the Circular’s provisions.
It amends the Financial Reporting Package by revising the Manual of Accounts (MOA) and the reporting templates of FRP and Simplified FRP to include a line for “Salary-Based General-Purpose Consumption Loans” under “Loans to Individuals Primarily for Personal Use Purposes,” and adjusts reporting classifications accordingly.
They must report/classify the financial assistance according to the purpose of the financial assistance (e.g., housing/real estate, motor vehicle, salary-based general-purpose consumption, etc.).
It applies to all salary-based general-purpose consumption loans as defined, including those outstanding prior to the effectivity of the Circular.
It takes effect fifteen (15) calendar days following its publication in the Official Gazette or a newspaper of general circulation. FIs are given six (6) months from effectivity to adopt/amend policies, procedures, and credit risk strategy to comply.
Banks and NSSLAs shall adopt the revised reporting templates effective for report ending 30 September 2015.