The Social Security System (SSS) has recovered P1.984 billion in back payments from overdue short-term loans during its six-month amnesty program which ended last September, a top official said.

SSS Assistant Vice President for Lending and Asset Management Ma. Luz. C. Generoso said 150,415 members availed of the amnesty, which condoned the penalties of delinquent salary, calamity, emergency, stock investment and other short-term loans.

“The amnesty program followed a demand from members for a way to help them settle their ballooning payments. We were able to condone P1.1 billion worth of penalties from delinquent members all over the country,” Generoso said.

A total of 1,010,674 members were able to update their accounts with SSS in various amnesty periods for short-term loans since 2004.

“We continue to study and look for best practices that can help increase our collections and returns in our loan investments in order to suffice our fund for future availments.” Generoso said

She added that the agency will implement a revised set of guidelines of SSS short-term loans in December 2012, which will allow members to take home bigger amount of loan proceeds.

“We will no longer deduct the first year’s interest from the loanable amount. The 10% effective annual interest of the loan will be charged based on diminishing principal balance and it will be amortized over 24 months.” Generoso said. “The interest will continue to be charged until the principal balance is fully paid.”

Under the new guidelines, amortizations for short-term member loans will be computed by charging interest on the outstanding balance of the loan at the beginning of each installment period.

Generoso explained that since the borrower will only pay interest on the amount of the principal that has not yet been repaid, the interest payment is declining every period.

“Early this year, we were enjoined by the Bangko Sentral ng Pilipinas (BSP) to conform with their new guidelines particularly in computing interest for entities with credit granting facilities. Subsequently, we drafted and submitted the necessary amendments in our loan granting, which the Social Security Commission approved through a resolution it issued in April 2012,” she said.

BSP issued new rules to credit providers that aim to enhance the implementation of the Truth in Lending Act or RA No.3765. The act ensures transparency and disclosure in loan transactions between banks and borrowers.

In recent reports, the Commission on Audit revealed that SSS has overcharged its members by P788.842 million in advance interest on salary loans in 2011. The state auditors attributed the alleged excess payments to the failure of SSS to use the method for normal installment type of credit prescribed by the BSP.

“There were no overcharges. Each lending institution may adopt its own method of calculating interest charges on loans and we adopted one of the accepted methods in interest computation,” Generoso said.

The SSS started deducting in advance the payments for the 1st year interest of salary loans in 2000 to address the reduced returns on investments due to the rapidly deteriorating performance of its member loans portfolio. – Sigfredo Ibay