House told: Law placing cap on OFWs’ loan interest rates not implemented
MANILA, Philippines — An advocacy group has informed lawmakers from the House of Representatives that a law placing an eight percent per year interest cap on loans taken by overseas Filipino workers (OFWs) is not being implemented properly.
During a hearing held by the House committee on overseas workers affairs on Thursday, lawyer David Castillon of the Advocates & Keepers Organization – OFW (AKO-OFW) claimed that there are cases where OFWs are charged with a 20 percent to 25 percent interest for the loans.
Republic Act No. 10022 stated in its Section 5 that part of Section 6 of R.A. No. 8042 or the Migrant Workers and Overseas Filipinos Act of 1995 would now include in the prohibited acts the provision of a loan to OFWs that has interest rates exceeding eight percent.
In 2017, the Department of Labor and Employment asked that the cap be brought down further to six percent.
READ: DOLE sets new rules for benefits, loans of displaced OFWs
Castillon said he has already handled thousands of cases where OFWs are getting loans with interest rates above eight percent per year.
Article continues after this advertisement“I have been handling thousands of cases of OFWs who are suffering from this problem. They were compelled to pay by the private lending institutions, the law requires 8% maximum interest under the present law. Now we have a new law which supposedly will be much better than the present law, it requires only 6% but what are we going to do?” he asked.
Article continues after this advertisement“Because at present, the actual situation, this is not being followed by the lending institutions. Some of the lending institutions would charge as high as 20 percent, 25 percent,” he added.
According to Castillon, there are even instances where OFWs prefer to take loans from lending institutions because they do not want to be bothered by their employer about their salary deductions.
The lawyer mentioned the issue during the discussions for House Bills No. 365, 1188, and 3378, all of which seek to establish a credit assistance program for OFWs.
Under the said proposed measures, OFWs may borrow up to P50,000.00 from the Overseas Workers Welfare Administration (OWWA), with any family member of the OFW being allowed to co-borrow as long as they submit the required documents.
The House Bills declared that the loan shall be paid in twelve monthly installments or more as long as it will not reach up to 24 months and the requested interest rate of the bank must not surpass six percent annually.
The said committee moved to consolidate the three bills, while another hearing was set for ironing out the differences between the measures and placing other possible amendments before it is forwarded to the plenary.
