DepEd reopens accreditation process for lending institutions

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Sunday, October 16, 2011

THE Department of Education (DepEd) has re-opened the accreditation process for private lending institutions (PLI) offering loans to its employees and public school teachers.

Education Secretary Armin Luistro said the expiration next month of the Automatic Payroll Deduction System-Memorandum of Agreement (APDS-MOA) with some 167 accredited PLIs prompted the department to re-open the process.
"In view of this, and 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 PLIs which are charging excessive interest and non-interest rates on loan, the department hereby announces the re-opening of accreditation and re-accreditation of the PLIs under the DepEd-APDS Clean-Up Program," Luistro said in DepEd Memorandum Order No. 228.
Earlier, Luistro has moved to put a stop to the collection of exorbitant interest rates on loans incurred by teachers and non-teaching personnel of the department by issuing a new order mandating the imposition of the "newly adjusted ceiling for interest and non-interest rates as well as the manner of the loan computation offered to teachers and other DepEd employees."
Under Memorandum Order No. 171, private lending institutions under the DepEd's APDS system are directed to impose an interest rate per annum of 7.50 percent, added on the principal amount of loan from the previous 10.97 percent. This is on loans payable within one year.
For loans payable within two years, the new order said rates should only be at 9 percent, way below the previous 12 percent.
On the effective interest rates per annum, Luistro said the new rate should be at 19.31 to 19.49 percent from the 23.93 to 24 percent earlier imposed.
The official said the new rates would protect teachers and other DepEd employees from being preyed upon by lending institutions who sometimes collect exorbitant rates while at the same time improving their net take home pay.
"The adjusted rates shall be made effective on loans to be incurred from July 2, 2011 onwards until further notice," Luistro said, warning PLIs that "conformity with these rates and manner of computation is a required condition for every PLI’s eligibility to participate in the DepEd APDS system."
Earlier, various teachers groups have called for reform in the APDS system saying that for many years it is unregulated, unmonitored and abused resulting to some PLIs charging interest rates as high as 75 percent of the loan.
They also said the some DepEd personnel are in collusion with these erring PLIs, particularly in the preparation of the monthly deduction reports.
Prior to Luistro's term, the department has implemented several measures to answer the teacher’s complaints including the review and accreditation of all PLIs, reprogramming the payroll system to prevent manipulation and re-engineering of the payroll system to prevent or discourage over-borrowing.
The late Senator Raul Roco during his brief stay as DepEd secretary has strictly enforced the ban on usurious practices in his department, earning him the ire of those who used to receive the service fees.
Roco also instituted a system under which teachers received their salaries promptly through banks instead of from payroll officers who, in many instances, delayed giving them their pay to force them to go to the loan sharks for loans.
Prior to his becoming the DepEd secretary in 2006, then Tarlac representative Jesli Lapus uncovered the excessive collection of interest rates on loan payment by teachers and non–teaching staff. 
Lapus's finding showed that lenders sometimes charge from 36 percent to almost 100 percent a year in interest rates. (AH/Sunnex)

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