QuestionsQuestions (BSP CIRCULAR NO. 1255)
It amends Subsection 3304.5(a)(1) of Book III of the Manual of Regulations for Banks and Other Financial Intermediaries to regulate when rural banks may impose penalties on past due loans, including defining “inexcusable neglect” and setting reasonableness limits.
A rural bank may impose penalty only if: (1) the borrower’s failure to pay on time is due to inexcusable neglect; and (2) the penalty is reasonable and not unconscionable.
The penalty must be reasonable and not unconscionable.
Inexcusable neglect means failure of the borrower to pay the loan on its due date for any reason except: (1) natural calamities such as typhoons and floods; or (2) grave illness or death of the borrower or any immediate family member; or (3) any other similar emergency beyond the control of the borrower.
Failure to pay is not considered inexcusable neglect if due to natural calamities (e.g., typhoons, floods), grave illness or death of the borrower or an immediate family member, or any other similar emergency beyond the borrower’s control.
The calamity or emergency must be the direct cause of the non-payment on the loan’s due date.
The borrower or any immediate member of his family (as stated in the circular).
It refers to the borrower’s non-payment at the specific contractual due date; the penalty permissibility hinges on what caused that failure.
It covers natural calamities plus grave illness/death plus any other similar emergency beyond the control of the borrower, provided they directly caused the non-payment.
It limits the rural bank’s discretion—penalties cannot be excessive, oppressive, or grossly unfair; they must remain within what is reasonable under the circumstances.
Subsection 3304.5(a)(1) of Book III was amended to read as the circular states.
Subsection 3304.5(a)(2) of the Manual was ordered deleted.
It takes effect immediately, as stated in the circular.
It is the approving resolution by which the Monetary Board approved the amendment that became BSP Circular No. 1255.
They must ensure the borrower’s non-payment stems from inexcusable neglect and that the imposed penalty is reasonable and not unconscionable; they must also respect the stated exceptions.
If the qualifying emergency is not shown to be the direct cause of non-payment on the due date, it would not fall within the stated exception, making the failure potentially inexcusable neglect, subject to the reasonableness/unconscionability limits of the penalty.