BSP clamps down on erring non-stock savings and loan associations

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is clamping down on non-stock savings and loan associations (NSSLAs) to protect members from wrong doings of their top officials.

The regulator issued Circular 1013 containing the amendments to the rules governing prejudicial acts, practices or omissions in regulating and supervising NSSLAs.

The guidelines aims to impose minimum requirements and standards resulting in judicious utilization of credit; place their operations on a sound, stable and efficient basis so they may provide for the establishment of additional savings and credit facilities in a fair manner to their members; and curtail or prevent acts, practices or omissions of NSSLAs which are prejudicial to their members, interest.

The amendment also aims to maximize the protection of members of NSSLAs against misfeasance and malfeasance of the trustees and officers thereof, the following rules and regulations on prejudicial acts, practices or omissions are hereby issued.

Acts, practices or omissions considered prejudicial to the interest of members

Include charging of unreasonably high service fees in the grant of loans

“For this purpose, service fee is considered unreasonably high if the service fee rate exceeds 50 percent of the annual nominal interest rate charged on a loan. lf the service fee rate is not indicated in the loan document, reference shall be made to the ratio of service fee to the principal loan granted,” the BSP said

Other unfair acts include recognizing as income unused insurance premiums instead of refunding or crediting the same to borrowers; non-disclosure to borrowers of borrowing costs such as, but not limited to, service fees and costs related to services rendered by agents or sales representatives; and adopting and implementing policies that are discriminatory such as, but not limited to, limiting the capital contributions of members that has the effect of concentrating control to a particular family; granting of unauthorized compensation, in any form, to trustees and officers.

The BSP also issued Circular 1016 requiring NSSLAs to come up with a compliance risk management and appoint a chief compliance officer to promote the safety and soundness of its operations and activities.

“The compliance risk management system shall be designed to specifically identify and mitigate risks that may erode the franchise value of the NSSLA, such as risk of legal or regulatory sanctions, material financial loss, or loss to reputation, an NSSLA may suffer as a result of its failure to comply with laws, rules and regulations, and codes of conduct applicable to its activities,” the BSP said.

There are about 63 NSSLAs registered with the BSP.