Bayanihan to Recover as One Act Frequently Asked Questions
Last September, President Duterte signed into law the Bayanihan to Recover as One (BARO) Act, which contains provisions on payment terms for loans due amid the COVID-19 pandemic.
On the implementation of RA Act No. 11494, otherwise known as the Bayanihan to Recover as One Act, and other prevailing rules during the COVID-19 Pandemic.
Frequently Asked Questions:
1. What is the latest rule regarding the mandatory grace period of loans, as provided in Section 4 (uu) of the Bayanihan to Recover as one Act (BARO Act)?
All covered institutions shall implement a non-extendible, one time 60 day grace period for all existing, current, and outstanding loans with principal and/or interest, including amortizations, falling due on or before 31 December 2020, without incurring any interest on interests, penalties, fees, and other charges, thereby extending the maturity of the said loans.
The parties are not precluded from mutually agreeing to a grace period longer than 60 days.
2. As far as the SEC is concerned, which institutions are covered by Section 4 (uu) of the BARO Act?
For the SEC, financing companies and lending companies with Certificates of Authority under the Financing Company Act and Lending Company Regulation Act of 2007, respectively, as well as microfinance NGOs, whether accredited under the Microfinance NGOs Act or not, are covered by Section 4 (uu) of the BARO Act.
3. What types of loans are covered by the application of the 60-day mandatory grace period?
The 60-day mandatory grace period covers loans such as, 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. It also covers loans obtained through online lending applications or platforms owned and operated by financing companies and lending companies.
4. How will SEC-covered institutions apply the 60-day mandatory grace period under Section 4 (uu) of the BARO Act?
All covered institutions shall implement a non-extendible, one-time 60-day grace period for all existing, current and outstanding loans with principal and/or interest, including amortizations, falling due from 15 September 2020, the effectivity of the BARO Act, until 31 December 2020, without incurring any interest on interests, penalties, fees, and other charges. The parties are not, however, precluded from mutually agreeing to a grace period longer than 60 days.
5. Do borrowers need a request for the approval of their application of the mandatory grace period under Section 4 (uu) of the BARO Act?
No. The one time 60 day mandatory grace period shall be automatically applied by SEC-covered institutions.
6. How and when will the borrower pay the principal and interest falling due from 15 September 2020 until 31 December 2020.
The principal and accrued interest for the 60 day grace period may be paid by the borrower in the following manner.
a. on a staggered basis until 31 December 2020.
b. as may be agreed upon by the parties (e.g. parties may agree to pay the principal and interest on a staggered basis beyond 31 December 2020).
c. in full on the new due date after the application of the 60 day grace period.
Accrued interest for this purpose shall refer to the interest that is due on the outstanding principal obligation but not yet paid since the last loan payment made. Take note that the 60-day mandatory grace period is essentially a deferment, which means that interest rates would continue to accrue during this time on the outstanding principal.
7. Does the 60-day mandatory grace period apply to both current and past-due loan accounts?
No. Section 4 (uu) of the BARO Act only covers accounts that are existing and outstanding upon the effectivity of the law. Only loans in current status and not past due are covered by the provision.
For this purpose, “existing” loans shall refer to loans granted prior to the effectivity of the act, which was on 15 September 2020.
8. When will the 60-day grace period requirement commence?
The 60-day grace period is required to commence from the due date of payment falling due from the effectivity date of the BARO Act on 15 September 2020 until 31 December 2020.
9. Does the borrower have the option to apply the 60-day mandatory grace period to any of his amortizations falling due from 25 September 2020 to 31 December 2020?
Yes, a borrower may opt to apply the one-time mandatory grace period to any of his amortizations falling due from 15 September 2020 to 31 December 2020.
10. Does the borrower have the option not to apply the 60-day mandatory grace period to any of his amortizations falling due from 15 September 2020 to 31 December 2020?
Yes, a borrower also has the option not to avail of the 60-day mandatory period. Accordingly, they may pay their obligations as they fall due.
11. Does the mandatory grace period apply to restructured loans?
Yes, loan accounts restructured before 15 September 2020 shall be covered by the mandatory grace period if such accounts are considered as current and performing as of 15 September 2020.
12. If an SEC-covered institution granted a loan account that is classified as current before 15 September 2020 with a grace period extending beyond the said date, will the payments falling due on or before 31 December 2020 of said account still be covered by the mandatory grace period under Sec. 4 (uu) of the BARO Act?
Yes, loans classified as current before 15 September 2020 with a grace period that extends beyond said date shall be covered by the mandatory grace period under Sec. 4 (uu) of the BARO Act.
13. If the SEC-covered institution granted a borrower a grace period prior to 15 September 2020, will this be considered as compliance with the mandatory grace period under Sec. 4 (uu) of the BARO Act?
No. The mandatory grace period under Sec. 4 (uu) of the BARO Act will only reckon from the time the loan, with the principal and/or interest, including amortization, payment falls due from 15 September 2020 until 31 December 2020.
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