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The Monetary Board in its Resolution No. 1465 dated 5 September 2019, approved  the  following  amendments  to  the  provisions  in  the  Manual  of Regulations  for  Non-Bank  Financial  Institutions  (MORNBFI)  on  the  rules governing prejudicial acts, practices or omissions of Non-Stock Savings and Loan Associations.

Section 1. Section 4184S and its Subsections of the Manual of Regulations for Non-Bank Financial Institutions applicable to Non-Stock Savings and Loan Associations (MORNBFI-S Regulations), are hereby amended to read as follows:

Section  4184S  Rules  Governing  Prejudicial  Acts,  Practices  or Omissions. In line with the policy of the state to regulate and supervise the activities of Non-Stock Savings and Loan Associations (NSSLAs) through issuance of minimum requirements and standards resulting in judicious utilization of credit; to place their operations on a sound, stable and efficient basis so they may provide for the establishment of additional savings and credit facilities in a fair manner to their members; to curtail or prevent acts, practices or omissions of these NSSLAs which are prejudicial to their members; interest; and to maximize the protection of members of NSSLAs against misfeasance and malfeasance of the trustees and officers thereof, the following rules and regulations on prejudicial acts, practices or omissions are hereby issued.

Subsection  4184S.1  Acts,  practices  or  omissions  considered prejudicial to the interest of members.

a.   In determining whether a particular act, practice or omission is prejudicial to the interest of members, the Monetary Board, upon report of the head of appropriate supervision and examination department, based on the finding in an examination or a complaint, shall consider the following circumstances:

(1)  The act, practice or omission is contrary to the generally accepted standards  of  prudent  operation  resulting  in,  or  may  result  in abnormal risk, damage or loss to the NSSLA; or

(2)  The act, practice or omission unduly burdens the members of the NSSLA  and/or  provide  unwarranted  benefit,  advantage  or preference to any party; or

(3)  The act, practice or omission has resulted or may result in material loss, damage or undue injury to members.

b.  Acts, practices or omissions considered prejudicial to the interest of members include, but are not limited to the following:

(1)  Charging of unreasonably high service fees in the grant of loans. For this purpose, service fee is considered unreasonably high if the service fee rate exceeds fifty percent (50%) of the annual nominal interest rate charged on a loan. lf the service fee rate is not indicated in the loan document, reference shall be made to the ratio of service fee to the principal loan granted;

(2) Recognizing as income unused insurance premiums instead of refunding and/or crediting the same to borrowers;

(3)  Non-disclosure to borrowers of borrowing costs such as, but not limited to, service fees and costs related to services rendered by agents/sales representatives;

(4)  Adopting and implementing policies that are discriminatory such as, but not limited to, limiting the capital contributions of members that has the effect of concentrating control to a particular family. For this purpose, a family refers to the employee-member and/or retiree- member and their relatives up to second degree of consanguinity or affinity;

(5)  Granting of unauthorized compensation, in any form, to trustees
and/or  officers.  Compensation  shall  be  considered  unauthorized when not allowed in the By-Laws or not approved by authorized bodies such as the members in a general assembly or the Board of Trustees;

(6)  Granting new or additional loans to borrowers who have insufficient paying capacity or poor credit history;

(7)  Collecting payments from members even after full payment of their loans, including failure to refund over-collections to members;

(8)  Charging   and/or   paying   material   unauthorized   disbursements, including expenses, or engaging in the practice of charging and/or paying unauthorized disbursements even if not material but when aggregated, result in material financial loss to the NSSLA; or

(9)  Allowing the use of NSSLA’s properties or privileges without due compensation.

The foregoing list is not exclusive. The Monetary Board may consider any other acts, practices, or omissions as prejudicial to the interest of members.

Subsection 4184S.2 Enforcement actions. Based on the seriousness and materiality of the prejudicial acts, practices or omissions, the NSSLA, its trustees  and  officers  shall  be  subject  to  administrative  sanctions  under Section 37 of R.A. No. 7653 or “The New Central Bank Act” and/or other applicable  enforcement  actions.  The  Monetary  Board,  pursuant  to  its authority under Section 22 of R.A. No. 8367 and subject to due notice and hearing, may order the suspension or revocation of an NSSLA’s license to operate as such if the prejudicial acts, practices or omissions amount to willful violation of this as such if the prejudicial acts, practices or omissions amount to willful violation of this Section, the provisions of R.A. No. 8367 or any other rule or regulation promulgated thereunder.

For this purpose, the act, practice or omission is deemed willful if, despite BSP directive to stop the said act, practice, or omission, the NSSLA and/or its trustees and/or officers, continue to commit the same or related acts. As used herein, the term “related acts” refer to specific acts which result in the same prejudicial act, practice or omission.

Moreover, the above is without prejudice to the filing of appropriate criminal charges against culpable persons as provided for under Section 23(c) of R.A. No. 8367.

Section 2. Effectivity

This Circular shall take effect fifteen (15) days after its publication either in the official Gazette or in a newspaper of general circulation.