You’ve just secured a loan for your business from a bank and then that bank suddenly closes down.
So, what happens to your loan — is it automatically forfeited? If not, how do you settle your obligations? Where should you go next?
IMAGE CREDIT: https://www.bankrate.com/
What happens to your loan?
According to Bankrate, when a bank is closed, its loans continue to exist and are usually transferred to another financial institution or entity. Your repayment term, interest rate and outstanding balance remain the same.
When a lender fails — whether it’s a bank or another financial institution — the first thing that happens is that its assets are sold to pay off creditors. Loans and other accounts are then considered as part of those assets.
To provide financial relief to closed-bank borrowers and to hasten the liquidation of a closed bank’s loan portfolio, the Philippine Deposit Insurance Corporation (PDIC) recently extended the implementation of the Closed Bank Loan Incentive Program (CLIP) 2.0 until the end of this year.
How do you settle your obligations?
The CLIP aims to help closed banks’ borrowers with outstanding principal balances of PhP5 million or less to pay off their loans more easily through incentives and discounts.
In 2021, authorities launched CLIP as a pandemic relief measure for closed-bank borrowers. With the positive reception of borrowers to CLIP and its significant contribution to the collection efforts of closed banks, it has since been enhanced and extended from January 2023 until year-end 2024.
Designed to incentivize borrowers of closed banks to settle their loan obligations, the CLIP provides substantial discounts on loan principal and reduction or waiver of interest rates and penalties, thus preserving the creditworthiness of closed-bank borrowers.
This incentive also helps ensure optimal recovery for closed banks for the benefit of creditors, including uninsured depositors.
As the statutory receiver of closed banks, the PDIC collects loan payments from borrowers and resolves loan accounts.
Where should you go next?
Under the extended program, closed-bank borrowers who owe up to P5.0 million in principal balances can apply for incentives based on when their banks were closed and whether their loans are clean or secured.
Borrowers with clean loans from banks closed in 2023 and 2024 have until December 31, 2024, or one year from receipt of PDIC’s Notice to Borrowers, whichever comes later, to avail of the incentives under the extended program.
For borrowers whose banks were closed in 2022 and prior years and have not yet availed of the incentives under the program, they may still do so until December 31, 2024, regardless of whether their loans are clean or secured.
For more details on CLIP, closed-bank borrowers can go to the PDIC website at www.pdic.gov.ph/CLIP, call the PDIC Public Assistance Hotline at (02) 8841-41-41 or the toll-free hotline at 1-800-1-888-PDIC or 1-800-1-888-7342 during office hours.
They can also send an e-mail to the PDIC Public Assistance Department at clip-pad@pdic.gov.ph, or send a private message to the official PDIC Facebook page, www.facebook.com/ OfficialPDIC. (PDIC/PIA-10)