MAKATI CITY, 21 April 2020 – As part of its mandate to collect and disseminate fair and accurate credit information and to ensure consumer rights protection amid the state of national emergency brought about by the COVID-19 pandemic, state-run Credit Information Corporation (CIC) called on its submitting financial institutions to refrain from tagging missed or partial payments of loans during the Enhanced Community Quarantine (ECQ) as default or delinquent in light of the Bayanihan to Heal as One Act.
In a letter-memorandum dated 17 April 2020, the country’s central credit registry and repository of credit information stated that missed payments or partial payments of loans, as well as other payment arrangements or debt relief measures afforded to borrowers during the ECQ, must not be tagged as “default” upon submission or reporting to the CIC database.
Citing Section 4 (aa) of the Implementing Rules and Regulations (IRR) of the Bayanihan to Heal as One Act, the CIC Letter Memorandum was issued on the basis that all covered institutions—defined in the Act as all lenders under the supervision of the Bangko Sentral ng Pilipinas (BSP), Securities and Exchange Commission (SEC), and Cooperative Development Authority (CDA), public or private, including the Government Service Insurance System (GSIS) and Pag-IBIG—shall implement a 30-day grace period to all loans with principal and/or interest falling due within the ECQ period, without incurring interest on interest, penalties, fees and other charges.
“We are one with the national government in promoting and protecting the collective interest of our citizens during this unprecedented period,” CIC President and CEO Jaime Casto Jose P. Garchitorena stated.
The PCEO emphasized that the role of the CIC is to ensure that its submitting financial institutions are submitting accurate data to assure a fair review and assessment of the credit history and financial condition of Filipino borrowers.
As of date, there are 483 financial institutions consists of credit card issuers, universal and commercial banks, thrift banks, rural banks, cooperatives and cooperative banks, savings and loan associations, private lending institutions, private leasing and financing companies, microfinance institutions, government-owned and controlled corporations (GOCC) with lending facilities, and insurance companies that are submitting data of their borrowers to the Credit Information System (CIS).
Positive and negative credit reporting
Garchitorena further explained that the CIC system is “not simply a negative or black list” as it allows the lenders to decide how to tag unpaid loans and be in sync with the government’s issuance on the matter.
He clarified that with or without ECQ, the CIC Credit Report does not reflect a positive or negative state but only indicates full payment, partial payment, or non-payment, with the lenders making the distinction of the information as being positive or negative.
CIC Senior Vice President for Business Development and Communications Atty. Aileen L. Amor-Bautista added: “Following the Bayanihan Act, lenders must not tag non-payments or missed payments as default when submitting data to the CIC. Otherwise, it would mean that they have not given their borrowers a one-month extension to pay their obligation.”
The PCEO and SVP likewise shared that the Corporation is in consultation with its own accredited credit bureaus, global experts in credit reporting, and the CIS developers to come up with best practices on how the CIC data will be used by lenders to assess and reassess their portfolio during and after ECQ.
“We are exploring ways to include notations in the CIC Credit Report that will clearly indicate the period of ECQ to create proper context to any payment behaviors that may emerge from the same,” Garchitorena said.
Creditworthiness and the “new normal”
The PCEO also shared that lenders should not use the non-payment of a borrower during ECQ as the mere basis for gauging creditworthiness.
“If the new normal is non-payment, lenders have to look at the historical data of their borrowers to determine a true trend of creditworthiness. They can also factor-in the ECQ as an event, and use the resulting analysis between both datasets to determine the best course of action in dealing with their respective borrowers,” Garchitorena opined, citing that the CIS has at least 24 months of historical data on most of its borrowers’ payment behaviors.
“The support for managing the loans of MSMEs and borrowers is a global phenomenon now. The goal of the CIC is to be a tool to avoid a generic assessment of loan failure during ECQ and instead help lenders craft appropriate recovery programs for their borrowers,” he continued.
Filing disputes as borrowers’ rights
The SVP further underscored the significance of the CIC’s Online Dispute Resolution Process (ODRP): “If a borrower requests for CIC Credit Report and sees a default tagged by the lender for the duration of ECQ, that borrower may file a dispute online with the CIC.”
The Letter Memorandum also reiterated the need for submitting entities to respond to disputes filed by borrowers through the ODRP within the set timeframe. It likewise extended the deadline of their submission of March 2020 credit data to 30 days from the lifting of the ECQ, effectively revoking an earlier issuance setting the deadline to 30 April 2020.
“All these guidelines are aimed at instilling and maintaining the public’s confidence not only in the country’s credit reporting system, but also among lenders and the entire financial ecosystem,” the CIC PCEO concluded.