Legality of Charging Interest on Deferred Loan Payments During the Pandemic

Is it legal for Sterling Bank to charge interest on the two-month pandemic grace period for a car loan?

The question of whether Sterling Bank or any financial institution in the Philippines can charge interest on deferred loan payments during the pandemic grace period involves understanding the relevant laws and regulations enacted to address financial relief measures during the COVID-19 crisis.

Bayanihan to Heal as One Act (Bayanihan 1)

1. Grace Period: Under Republic Act No. 11469, also known as the Bayanihan to Heal as One Act (Bayanihan 1), a mandatory grace period was granted for all loans with principal and/or interest falling due within the enhanced community quarantine (ECQ) period.

2. No Additional Interest, Penalties, or Fees: Section 4(aa) of Bayanihan 1 explicitly states that no additional interest, penalties, fees, or other charges should be imposed on the deferred payments during the grace period. This provision aimed to provide financial relief to borrowers affected by the pandemic.

Bayanihan to Recover as One Act (Bayanihan 2)

1. Extended Grace Period: Republic Act No. 11494, or the Bayanihan to Recover as One Act (Bayanihan 2), extended similar relief measures, including an additional mandatory one-time 60-day grace period for all existing, current, and outstanding loans as of September 15, 2020.

2. Accrued Interest: Under Bayanihan 2, while the grace period was provided, accrued interest during the grace period could still be charged. However, this interest should not be compounded or result in additional interest on interest.

Implementation and Compliance

1. Bank Compliance: Financial institutions, including Sterling Bank, were required to comply with these provisions. Charging additional interest, penalties, or fees during the grace periods mandated by Bayanihan 1 and 2 would be a violation of these laws.

2. Consumer Rights: Borrowers should be aware of their rights under these laws. If a bank imposes additional charges contrary to the provisions of Bayanihan 1 or 2, borrowers can file a complaint with the Bangko Sentral ng Pilipinas (BSP) or seek legal redress.

Legal Recourse for Borrowers

1. Filing a Complaint: Borrowers who believe that their rights under the Bayanihan laws have been violated can file a complaint with the BSP. The BSP regulates financial institutions and ensures compliance with banking laws and regulations.

2. Seeking Legal Advice: Consulting with a lawyer can provide guidance on the appropriate steps to take. Legal action may involve filing a case for refund of any overcharged amounts or seeking damages for the financial hardship caused.

3. Documentation: Keeping detailed records of all loan documents, communications with the bank, and payment receipts is crucial. These documents can serve as evidence in case of a dispute.

Conclusion

In summary, under Bayanihan 1, banks were prohibited from charging additional interest, penalties, or fees on deferred loan payments during the grace period. Under Bayanihan 2, while interest could accrue, it should not be compounded. Borrowers should ensure that their rights are upheld and seek legal recourse if they believe they have been overcharged. Financial institutions must comply with these laws to provide the intended relief to borrowers during the pandemic.