A Better Understanding of Grace Periods for Loan Payments During ECQ

Here’s the thing, while the Bayanihan Act provides a 30-day grace period from the due date or until such time that the community quarantine is lifted for the payment of loans, it does not give a complete waiver of the interest, penalties and other charges due within the community quarantine period. Instead, a deferment of the principal and interest loan payments falling due within the community quarantine period is permitted.  

Lenders are allowed to charge “interest and other fees” as imposed in the loan agreement and collect it following the lifting of the community quarantine but not “interest on interest, penalties and other charges” not originally falling within the community quarantine period.

This means that forms of penalties such as additional interest and or charges, late payment penalties, rescheduling fees, etc. that were not agreed upon cannot be imposed. What can only be applied is “interest”, as in the contractual interest, applied in loans as the price of money.

If before the ECQ A lends a loan of Php100,000 to B with an interest of 1% per month due on 31 March 2020, B can defer payment up until the community quarantine is lifted. A can continuously charge B the interest of 1% per month until he has paid, however A cannot charge B an additional penalty on top of the principal and interest for deferring payment.

Lenders should be reminded to strictly observe the Bayanihan Act since the law penalizes anyone who charges extra for deferred payment during the grace period by imprisonment of two (2) months or a fine of not less than Ten Thousand Pesos (P10,000.00) but not more than One Million Pesos (P1,000,000.00), or both, at the discretion of the court.