MANILA, Philippines - To prevent teachers from becoming prey to loan sharks, the Department of Education (DepEd) is reopening the accreditation of Private Lending Institutions (PLIs) that can offer credit windows with better terms and lower financial charges on loans availed by teachers and personnel of the department.
DepEd Secretary Armin Luistro said there is a need to widen the field of PLIs so that public school teachers and non-teaching personnel can choose which ones have the best offer.
"This is part of our on-going reform to prevent our teachers from falling prey to loan sharks," he said.
Under DepEd's Automatic Payroll Deduction System (APDS) Clean Up Program, Luistro said that PLIs that charge exorbitant fees and unreasonable loan terms have been deleted from the accreditation list.
"The grant of automatic payroll deduction for loans extended to public school teachers and employees through the issuance of a lending code is a privilege extended by DepEd and not a matter of right to be invoked by any outside party," Luistro said.
Based on DepEd Memorandum No. 228 series of 2011, "only entities expressly authorized by law may avail of the privileges under APDS." The PLIs include banks, insurance companies, financing companies, mutual benefits associations, teachers' cooperatives or associations, non-stock savings and loans associations.
As per the said DepEd Memo, entities participating in the APDS should conform with the ceilings on interest and non-interest rates on loan pursuant to DepEd Order No. 171, s. 2011 entitled "Reduction of Nominal and Effective Rates on Loan to be Offered by Accredited Private Lending Institutions under the Department's APDS." The said rates may be adjusted anytime by the Department depending on the prevailing market rates.
The particulars cited in the DepEd Order No. 171 dated July 29, 2011 stated that the "Nominal Interest Rates per annum which ranges from 10.97% to 12.00% added on loan shall be made 7.50% to 9.00%; One Other Charges of 6.00% deducted upfront from the principal amount of loan will be 6.00% deducted upfront; Effective Interest Rates per annum from 23.93% to 24.00% will be lowered to 19.31% to 19.49% and the Rebate Discount from based on the agreement between the parties to only the principal loan balance shall be paid by the DepEd borrower in case of advance payment of loan in full. The grace period on first loan amortization remains for two months."
Availing of loans is considered a common practice among teachers particularly in public schools where many of them claim that salary is low. Aside from availing loans from lending companies, some teachers are forced to borrow money through "five-six" (5-6) wherein the amount borrowed, when returned, should include 20 % interest which makes it harder for the borrower to pay.
Luistro said that the re-opening of accreditation/re-accreditation of the PLIs under the DepEd-APDS Clean Up program is in line with the Department's thrust to protect and secure public school teachers and employees, specifically in assisting to alleviate financial needs by way of preventing them to borrow from the PLIs which are charging excessive interest and non-interest rates on loan.
The interested PLIs may download the complete requirements and accreditation criteria by downloading forms at www.deped.gov.ph. Applications for PLI accreditation may be submitted to the Office of the Undersecretary for Finance and Administration until March 31, 2013.