Bangko Sentral urged to check savings and loan associations

MANILA, Philippines -  Financing companies have asked the Bangko Sentral ng Pilipinas (BSP) to issue a cease and desist order against an illegal practice being conducted by certain non-stock savings and loan associations (NSSLAs).

These NSSLAs have been accused of providing loans to active and retired members/ pensioners of the Philippine National Police (PNP), even if the borrowers still have existing unpaid loans with other firms.

The financing firms are led by DES Financing Corp., Diamond Finance Corp., Facil Lending Corp., Integrity Financing Corp., JMC Financing and Marketing Corp., Quicklend Financing, Inc. and Silver WDC Finance, Inc. The group provides loans to PNP pensioners, and are duly registered with the Securities and Exchange Commission (SEC).

Under the law, the BSP exercises supervisory and oversight functions over all NSSLAs, and is mandated to guard against the grant of excessive credit relative to an applicant’s capacity to pay. Logically, therefore, a PNP retiree cannot use the same pension as collateral a loan take-out requirement from multiple lenders.

“There have been many instances where my fellow retirees have been persuaded to take out a second – and even third – pension loan, not fully understanding the implications of this,” said retired police officer Edgar Olana. “Sometimes they are even tricked into believing that their previous loans are cancelled, or that there won’t be any collections on the new loans until the previous obligations are paid. Of course, this is not true,” he said.

Olana reiterated the appeal of the financing companies for the BSP to put an end to this deleterious practice. Based on Section 17 (e) of The New Central Bank Act, the BSP governor has the power and duty to “render opinions, decisions, or rulings which shall be final and executory until reversed or modified by the Monetary Board, on matters regarding application or enforcement of laws pertaining to institutions supervised by the BSP and laws pertaining to quasi-banks, as well as regulations, policies or instructions issued by the Monetary Board, and the implementation thereof.”

“We have tried our best to reach out to our fellow retirees in order to educate them about correct loan procedures, but the lure of new money is just too attractive,” Olana explained. “Unfortunately, this situation leads to only one ending: the retiree is saddled with debts that he or she cannot pay, mounting interest on the loans, and ultimately, court cases and legal consequences. Hopefully, the BSP can look into this immediately,” he added.