SEC-Davao calls on lending and financing companies to use fair practices, advises borrowers to manage loans
DAVAO CITY — The Securities and Exchange Commission-Davao Extension Office (SEC-DEO) has warned lending and financing companies to follow fair collection practices as the government has provided reprieve to borrowers to cushion the impact of the coronavirus pandemic on their debts.
The SEC-DEO made the statement as the newly-passed Bayanihan to Recover as One Act, more popularly known as Bayanihan 2, provides a one-time mandatory 60-day grace period to borrowers in settling their debts during the time of the coronavirus pandemic.
“They should not resort to using unfair collection practices, and must remember that the lifeblood of their businesses are the borrowers,” the office said.
In making the call, the office cited the order of the SEC Corporate Governance and Finance Department (CGFD) on August 25 which revoked the Certificate of Authority of FCash Global Lending Inc. for committing unfair collection practices based on SEC Memorandum Circular No. 18, Series of 2019 (SEC MC 18), the Prohibition on Unfair Debt Collection Practices of Financing Companies and Lending Companies.
In that order, the CGFD said that the company, which was operating online platform Fast Cash and Fast Cash Loans “made multiple attempts to collect loan payments by contacting or threatening persons other than those that the borrower has identified as guarantors or co-makers.”
The SEC-DEO said the order of the CGFD in revoking an entity’s authority to operate should be a lesson for lenders not to employ tactics that will result in threatening or shaming their borrowers.
The office has also urged borrowers to manage their loans properly by paying these debts if they have the capacity even when there is a reprieve.
“Borrowers must consider paying their debts during the grace period, especially if they still have the capacity to pay because they might take advantage of the reprieve without considering its impact on their future cash flow,” the office said.
It pointed out that the grace period is primarily intended to those who are struggling to pay their loans as this will give them time to find ways to settle these accounts payable.
On September 15, Bayanihan 2 became a law and one of the provisions, particularly Section 4, directs lenders “to implement a mandatory one-time 60- day grace period to be granted for the payment of all existing, current and outstanding loans falling due, or any part thereof, on or before December 31, 2020, including, but not limited to, salary, personal, housing, commercial, and motor vehicle loans, amortizations, financial lease payments and premium payments, as well as credit card payments, without incurring interest on interests, penalties, fees, or other charges and thereby extending the maturity of the said loans.”
It added that these loans “maybe settled on staggered basis without interest on interests, penalties and other charges until December 31 or as may be agreed upon by the parties.”
The same law also specifies that borrowers and the lenders can also mutually agree on the length of the grace period.
The Commission is expected to publish soon on its website (www.sec.gov.ph) FAQs (Frequently Asked Questions) on the Notice to Financing, Lending and Microfinance Non-Government Organizations (NGOs) on the Implementation for All Loans Pursuant to the Bayanihan to Recover As One Act.
The Commission is also holding a series of free webinars on its Facebook page (https://www.facebook.com/PhilippineSEC) as part of its SEC Communication, Advocacy and Network Initiative 2020. One of the upcoming topics will be on the lending and financing industry. The CGFD, on October 28, 2020, will discuss an overview of its supervision on lending companies, financing companies, registered foundations, and accredited microfinance NGOs, the Truth in Lending Act, and the prohibition on unfair debt collection practices of financing companies and lending companies.