Grace Periods under Republic Act No. 11494 or the “Bayanihan to Recover as One Act”

On 15 September 2020, Republic Act No. 11494 or the “Bayanihan to Recover as One Act” (the “Bayanihan II Act”) took effect. The law was enacted to reduce the adverse impact of COVID-19 on the socio-economic well-being of all Filipinos through the provision of assistance, subsidies, and other forms of socio-economic relief. Among the reliefs granted by the law are the grace periods for loans, utilities, and rents.

Grace Period for the Payment of Loans

Through Section 4(uu) of the Bayanihan II Act, all banks, quasi-banks, financing companies, lending companies, real estate developers, insurance companies providing life insurance policies, pre-need companies, entities providing in-house financing for goods and properties purchased, asset and liabilities management companies and other financial institutions, public and private, including the Government Service Insurance System, Social Security System and Home Development Mutual Fund (Pag-IBIG Fund), are required to implement a one-time sixty (60)-day grace period for the payment of all existing, current and outstanding loans falling due on or before 31 December 2020. It should be noted, however, that Section 4(uu) of the Bayanihan II Act does not apply to interbank loans and loan borrowings. 

The law allows borrowers to settle their loans on a staggered basis without interest on interests, penalties, and other charges until 31 December 2020. However, lenders and borrowers covered by the Bayanihan II Act may agree on the payment of accrued interests on a staggered basis even beyond 31 December 2020. 

On 18 September 2020, the Bangko Sentral ng Pilipinas issued BSP Memorandum No. M-2020-68. The said BSP memorandum ordered Bangko Sentral Supervised Financial Institutions (“BSFIs”) to comply with Section 4(uu) of the Bayanihan II Act. It provides that the mandatory one-time sixty (60)-day grace period applies to each loan of individuals and entities with multiple loans. Further, BSFIs are prohibited from requiring their clients to waive the application of the provisions of the Bayanihan II Act. Waivers previously executed by borrowers covering payments falling due until 31 December 2020 are not valid. 

On 21 September 2020, the Securities and Exchange Commission released a similar issuance requiring financing companies, lending companies, and micro-finance non-governmental organizations to comply with Section 4(uu) of the Bayanihan II Act. 

Grace Period for the Payment of Utilities

The Bayanihan II Act also grants relief from the payment of utility bills during the strict lockdowns. Section 4(vv) directs all institutions providing electric, water, telecommunications, and other similar utilities to implement a minimum thirty (30)-day grace period, without incurring interests, penalties, and other charges, for the payment of utilities falling due within the period of Enhanced Community Quarantine or Modified Enhanced Community Quarantine.

After the grace period, unpaid residential, micro, small, and medium enterprises (“MSMEs”), and cooperatives utility bills may be settled on a staggered basis payable in three (3) monthly installments, without interests, penalties, and other charges.

In the case of the electric power sector, the grace period and staggered payment apply to all payments due within the period of community quarantine in the entire electric power value chain to include generation companies, the transmission utility, and distribution utilities.

Grace Period for the Payment of Rents

Under Section 4(ww) of the Bayanihan II Act, lessees who are not permitted to work, and MSMEs, and cooperatives ordered to temporarily cease operations are given a minimum of thirty (30)-day grace period on their residential and commercial rents falling due within the period of community quarantine. The grace period begins from the day the Enhanced Community Quarantine or Modified Enhanced Community Quarantine is lifted. 

The Bayanihan II Act further provides that rental payments due within the period of community quarantine will be amortized in equal monthly installments until 31 December 2020 without any interests, penalties, and other charges. Additionally, lessors are prohibited from increasing rent during the period of community quarantine.

Indeed, the effects of COVID-19 has placed a financial strain on many families and businesses. The grace periods under the Bayanihan II Act are just a few of the many measures that were enacted to support individuals and businesses burdened by the community quarantine.