Law Summary
Regulatory Framework and Policy Statement
- Loans are recognized as helpful in managing borrower cash flows under sound credit and consumer protection standards.
- BSP encourages competition, transparency, efficient financial service delivery, and fair treatment of borrowers.
Credit Granting Policies and Loan Terms
- Lending institutions must follow sound credit processes beyond mere salary multiples.
- Comprehensive borrower creditworthiness assessment required, considering total indebtedness and disposable income.
- Original terms limited to maximum of 3 years, extendable to 5 years in meritorious cases.
- Loan renewals require reassessment, payment of accrued interest, and significant principal reduction.
- For loan takeouts, full settlement with the originating financial institution is mandatory before new loan issuance.
- Institutions must institute controls for loan takeout including direct proceeds release and official receipt verification.
Consumer Protection Standards
- Strict observance of BSP's Financial Consumer Protection regulations applies.
- Institutions must adhere to Manual of Regulations for Banks (Part Ten) and Savings and Loan Associations Regulations (Part 4).
Sanctions and Enforcement
- Monetary Board empowered to impose sanctions on financial institutions and their officers for persistent non-compliance.
- Sanctions are proportionate to the seriousness of the offense.
Financial Reporting Requirements
- Amendments to Manual of Regulations for Banks and Non-Bank Financial Institutions to include specific account classifications for salary-based loans.
- Specific reporting templates revised to include salary-based general-purpose consumption loans as a distinct category.
- Banks, rural, cooperative banks, and non-stock savings and loan associations must adopt revised templates by reporting period ending September 30, 2015.
Transitory Provisions and Compliance Timeline
- The guidelines apply to all existing and future salary-based loans as defined.
- Financial institutions granted six months from effectivity to align policies and credit risk strategies with new rules.
Effectivity Clause
- The guidelines become effective fifteen calendar days after publication in the Official Gazette or a newspaper of general circulation.