Understanding the 30-day extension of payment of loans under the Bayanihan Act

When President Rodrigo Duterte signed into law the Bayanihan to Heal as One Act, it granted him 30 special powers while the island of Luzon is under Enhanced Community Quarantine (ECQ). One of those powers is the power “to implement a 30-day grace period for the payment of all loans — salary, personal, housing and motor vehicle — as well as credit card payments, falling due within the period of the ECQ without incurring interests, penalties, fees, or other charges.” In addition, “persons with multiple loans shall likewise be given the minimum 30-day grace period for every loan.”

While under the ECQ, these institutions are prohibited from imposing any interest on interest, penalties, fees and other charges.

On April 1, the Department of Finance (DOF) issued the implementing rules and regulations (IRR) of Section 4 (aa) of the Bayanihan Act. A “grace period” is the period of time beyond a due date wherein a financial obligation (or loan) may be met without penalty or cancellation. But under the IRR, the loan is still due but not yet payable. Similarly, the amortization — both principal and original interest — are not waived, only made payable at a later date.

The institutions covered by this provision include banks, quasi-banks, non-stock savings and loan associations, credit card issuers, pawnshops, cooperatives, credit granting financial institutions under the supervision of the Bangko Sentral ng Pilipinas (BSP) and the Securities and Exchange Commission (SEC), Government Service Insurance System (GSIS), Social Security System (SSS), and Pag-IBIG Fund.

While under the ECQ, these institutions are prohibited from imposing any interest on interest, penalties, fees and other charges. However, the borrower has the option — based on his discretion — to pay the obligations as they fall due during the lockdown.

Any violations will be subjected to appropriate penalties set forth by the Bayanihan Act. Refusal to provide a 30-day grace period is a criminal offense, punishable with imprisonment of two months or a fine of not less than P10,000 but not more than P1,000,000, or both, at the discretion of the court.

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