Re-Opening of Accreditation/Re-Accreditation of the Private Lending Institutions (PLIs) Under the DepEd -Automatic Payroll Deduction System

The Automatic Payroll Deduction System-Memorandum of Agreement (APDS-MOA) of the 167 accredited Private Lending Institutions (PLIs) with the Department of Education (DepED)-APDS will expire on November 30, 2011. 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 the PLIs which are charging excessive interest and non-interest rates on loan, this Office hereby announces the Re-opening of Accreditation/Re-accreditation of the PLIs under the DepED-APDS Clean-up Program.

The DepED Central Office, through the Office of the Undersecretary for Finance and Administration, shall receive applications from October 17, 2011 to December 31, 2011.

Necessary documents for accreditation/re-accreditation are enumerated in the enclosed Revised Guidelines and Criteria on Accreditation/Re-accreditation and Revocation of Code under the APDS.

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I.    PURPOSE

These guidelines are issued to enhance the existing rules and criteria set under DepEd Memorandum No. 118, s. 2008, on the Department's (APDS) Accreditation/Re-accreditation of Private Lending Institutions (PLIs).

II.    LEGAL BASIS

Only entities expressly authorized by law may avail of the privileges under APDS, in view of the following:

1.    Section 21 of RA 4670 re: Magna Carta for Public School Teachers which states that "No person shall make any deduction whatsoever from the salaries of teachers except under specific authority of law authorizing such deductions";

2.    Section 66, Title I(A), Book V of the Administrative Code of 1987] which stipulates that "Except as may otherwise be provided by law, it shall be unlawful for a treasurer or other fiscal officer to draw or retain from the salary due an officer or employee, any amount for contribution or payment of obligations other than those due the government or its instrumentalities";

3.    General Provisions, Section 43. Authorized Deductions (General Appropriations Act for FY 2011) which states that "Deductions from salaries, emoluments or other benefits accruing to any government employee chargeable against the appropriations for Personal Services may be allowed for the payment of individual employee's contributions or obligations due the following:

a.    The BIR, GSIS, HDMF and PHILHEALTH;

b.    Mutual benefits associations, thrift banks and non-stock savings and loan associations duly operating under existing laws which are managed by and/or for the benefit of government employees;

c.    Associations/cooperatives/provident funds organized and managed by government employees for their benefit and welfare;

d.    Duly licensed insurance companies accredited by national government
    agencies; and    xxx."

III. DEPARTMENT POLICY

1.    The grant of automatic payroll deduction for loans extended to DepEd teachers/personnel through the issuance of a "lending code" is a privilege extended by the Department and not a matter of right to be invoked by any outside party.

2.    The DepEd shall regulate the use of its APDS to protect and secure its employees' welfare. Specifically, this shall translate into:

2.1 Accreditation/re-accreditation of PLIs expressly authorized by law to make deductions from the salaries of government employees (particularly DepEd personnel). Such organizations shall be duly registered with the proper government regulators.'
2.2 Provision of a ceiling on interest rates, service charges, other fees charged by lending institutions participating in the scheme in order to prevent usurious lending; and
2.3 Prevention and/or elimination of illegal and unauthorized deductions from DepEd personnel's salaries.

3.     A centralized accreditation/re-accreditation system shall be implemented with the assignment of an APDS Code for lending, authorized and assigned by the Office of the Secretary only through the execution of an APDS-MOA, pursuant hereof.

4.    Accreditation/re-accreditation shall be granted to entities, as defined and enumerated under Item III.4.1.1 that agree to abide with these specific guidelines, with reference to the following:

4.1 Legal existence and license to operate as granted by the government through its different regulators.

4.1.1 "Entities" shall include the following:

a) Companies, cooperatives and associations enumerated under Item 11.3 (b to d);

b)    Rural Banks pursuant to Section 5 of RA 7353 and Department of Justice (DOJ) Opinion No. 6, s. 2008 signed by former Secretary Raul M. Gonzalez; and

c)    Financing companies pursuant to DOJ Opinion No. 36, s. 2008 signed by former DOJ Secretary Raul M. Gonzales.
4.2 Full transparency in reporting operations and financial status. 4.3 Other conditions set forth in the MOA.

5.    Affiliates/associates/partners and PLIs with problem on Chairmanship/ ownership are not allowed under APDS.

6.    Entities accredited/re-accredited by DepEd shall not be allowed to avail of the APDS Program in the Region where they have no office/branch.

7.    Entities participating in the APDS shall also conform with the ceilings on interest and non-interest rates on loan as shown below pursuant to DepEd Order No. 171, s. 2011 entitled Reduction of Nominal and Effective Rates on Loan to be Offered by Accredited Private Lending Institutions under the Department's APDS, photocopy attached and marked as Enclosure "A." The said rates may be adjusted anytime by the Department depending on the prevailing market rates.

Particulars	Ceilings
Nominal Interest Rates	1 year - Maximum of 7.5% added on the principal amount of loan 2 years - Maximum of 9:00% per annum, added on the principal amount of loan
One-time Other Charges (must be itemized)	Maximum of 6%, deducted upfront from the principal amount of loan
Effective Interest Rates per Annum	19.31% to 19.49%

8. Entities participating in the APDS shall be subject to the following service fees which shall be collected by the Department of Education (central, region, division, and schools with fiscal autonomy) and deposited to its Trust Receipt Account in the National Treasury:

8.1 For banks, insurance companies and financing companies = One per cent (1 %) of amount remitted/collected

8.2 For mutual benefits associations, teachers' cooperatives/ associations, non-stock savings and loans associations = One half per cent (0.5%) of the amount remitted/collected.

IV. ACCREDITATION/RE-ACCREDITATION COVERAGE

1.    The revised guidelines shall apply to all entities identified under Item 111.4.1.1 aspiring to participate in the APDS at the national, regional, division, district and school levels.

2.    Accreditation/re-accreditation shall be valid for a period of five (5) years from the date of the signing of the APDS-MOA by the Department Secretary, unless earlier revoked by DepEd for legitimate causes.

V. ACCREDITATION CRITERIA

To be eligible for consideration for accreditation, applicants must satisfy the following minimum requirements:

1. Institutional Criteria

1.1 Legally organized; duly registered with government regulatory agency such as the Securities and Exchange Commission (SEC), Bangko Sentral ng Pilipinas (BSP), Insurance Commission (IC) and Cooperative Development Authority (CDA);
1.2 Authorized to lend based on the primary or secondary purpose stated in Articles of Incorporation/Cooperation;
1.3 Operating and in good standing for the current year as certified by SEC/BSP/IC/CDA;
1.4 Must have full-time manager and staff who shall maintain the complete records/loan documents and attend to loan transactions and any queries/complaints of DepEd teachers/personnel;
1.5 With a track record of at least five (5) years lending operation (for new applicants only); and
1.6 No records of pending civil, administrative or criminal case with the court and SEC/IC/CDA/BSP that could affect the accreditation/re-accreditation under the APDS.

2.  Financial Criteria

2.1 Must have sufficient capitalization as required by the appropriate government regulatory agency, but in no case shall the capitalization of an applicant entity be less than P5 million.

2.2 For banks:

2.2.1 No past due obligation with the BSP or with any financial institution as of date of application; and

2.2.2 In good standing with the Philippine Deposit Insurance Corporation (FDIC).

VI. NECESSARY DOCUMENTS FOR SUBMISSION BY APPLICANTS

A. For Accreditation (New Applicants)

1. The applicant must submit the following original or duly certified photocopies of the documents issued by the appropriate government regulatory agency:

1.1 For SEC registered entities

a)    Certificate of Incorporation/Registration
b)    Articles of Incorporation and By-Laws and as well as Amendments, if any
c)    Updated General Information Sheet
d)    Certification from SEC that the entity has not been dissolved nor has the Commission received any information derogatory to said entity that would prevent it from exercising its primary franchise
e)    Certification of no pending civil, administrative and criminal case filed with SEC

1.2 For BSP registered entities (in addition to the required documents from SEC)

a)    Certificate of Authority
b)    Certification of no pending civil, administrative and criminal case filed with the BSP
c)    Certification of Good Standing issued by the PDIC

1.3 For IC registered entities (in addition to the required documents from SEC)

a)    Certificate of Registration
b)    Certificate of Authority
c)    Certification of no pending civil, administrative and criminal case filed with IC

1.4 For CDA registered entities

a)    Certificate of Registration
b)    Articles of Cooperation and By-Laws and as well as Amendments, if any
c)    Latest Annual Performance Report
d)    Updated CDA General Information Sheet
e)    CDA Certification of Good Standing intended for DepEd APDS Accreditation purposes (original copy)

2. Additional documents required from all new applicants:

2.1 Letter of Intent signed by the President/Chairman/Chief Executive Officer

2.2 Curriculum vitae/bio-data of corporate directors and officers with ID, pictures, including percent shares owned in the company/ organization2

2.3 Ownership structure to include, among others, the percent shares owned by each of the stockholders

2.4 Latest company or organization profile (to include services or products offered to DepEd employees)

2.5 In case of mutual benefits association or teachers' cooperative/association, a Certification from its President/Chairman that their organization is duly operating under existing laws which are managed by and/or for the benefit of government employees

2.6 Audited financial statements for the past two (2) years duly stamped received by the BIR (Fiscal Years 2009 and 2010)

2.7 Copy of Income Tax Return for the past two (2) years (Fiscal Years 2009 and 2010)

2.8 BIR Certification of Tax Identification Number (TIN)

2.8 Addresses and landline telephone numbers of the main and all field offices, and contact numbers of managers

2.9 Rates of interest and non-interest on loan to be offered to DepEd employees (and the methodology used in applying such rate)

2.10 Summary of other one-time itemized charges levied on each loan and the manner by which these are collected

2.11 Subscribed statement attesting to the Truth in Lending Act with attached expanded Disclosure Statement on Loan/Credit Transaction (as Required under R.A. 3765, Truth in Lending Act)

2.12 Business Permits intended for lending purposes of all offices/ branches, duly validated/verified by the DepEd Regional Office

2.13 Contract of Lease (effective during the term of the APDS-MOA) or proof of ownership of office/s

B. For Re-accreditation (with existing APDS Code for Lending)

1. The applicant must submit the following original or duly certified photocopies of the documents issued by the appropriate government regulatory agency:

1.1 For SEC registered entities

a)    Amended Articles of Incorporation and By-Laws Amendments, if any

b)    Updated General Information Sheet

c)    Certification from SEC that the entity has not been dissolved nor
has the Commission received any information derogatory to said
entity that would prevent it from exercising its primary franchise

d)    Certification of no pending civil, administrative and criminal case
filed with SEC

2.2 For BSP registered entities (in addition to the required documents from SEC)

a)    Updated Certificate of Authority

b)    Certification of no pending civil, administrative and criminal case filed with the BSP

2.3 For IC registered entities (in addition to the required documents from SEC)

a)    Updated Certificate of Authority
b)    Certification of no pending civil, administrative and criminal case filed with IC

2.4 For CDA registered entities

a) Articles of Cooperation and By-Laws and as well as Amendments, if any

b)    Latest Annual Performance Report

c)    Updated CDA General Information Sheet

d)    CDA Certification of Good Standing intended for DepEd APDS Accreditation purposes (original copy)

3. Additional documents required from applicants for re-accreditation:

3.1 Letter of Intent signed by the President/Chairman/Chief Executive Officer

3.2 Updated curriculum vitae/bio-data of corporate directors and officers with ID, pictures, including percent shares owned in the company/ organization

3.3 Ownership structure to include, among others, the percent shares owned by each of the stockholders

3.4 Latest company or organization profile (to include services or products offered to DepEd employees)

3.5 In case of mutual benefits association or teachers' cooperative/ association, a Certification from its President/ Chairman that their organization is duly operating under existing laws which are managed by and/or for the benefit of government employees

3.6 Audited Financial Statement for Fiscal Year 2010, in case not yet
submitted to the APDS Secretariat (Management Division)

3.7 Income Tax Return for Fiscal Year 2010, in case not yet submitted to
the APDS Secretariat (Management Division)

3.8 Updated BIR Certification of Tax Identification Number (TIN);

3.8 Updated addresses and landline telephone numbers of the main and all field offices, and contact numbers of managers;

3.9 Updated Business Permits intended for lending purposes of all offices/ branches, duly validated/verified by the DepEd Regional Office;

3.10 Updated Contract of Leases (effective during the term of the APDS¬MOA) or proof of ownership of office/s;

3.11 Soft copies/electronic files containing a universal listing of all current loans by DepEd borrowers, with the following information:

•    Name of the DepEd borrower (per loan)
•    Region/division/station/employee number
•    Principal amount borrowed and amount actually released
•    Term of loan (starting month, ending month)
•    Rate of interest
•    Other detailed charges

The Department may, from time to time, require lending institutions to submit hard copy/ies of Promissory Notes, Authority to Deduct, Disclosure Statements and Subsidiary Ledger of DepEd borrowers.

VII. PROCEDURES ON ACCREDITATION/RE-ACCREDITATION

1.    Entities aspiring to participate in the APDS must file a Letter of Intent together with the required supporting documents addressed to the Office of the Secretary, through the Office of the Undersecretary for Finance and Administration. The acceptance of application shall be from October 17 to December 31, 2011.

2.    The Office of the Undersecretary for Finance and Administration through the designated APDS Technical Working Group (TWG) shall review and evaluate the submitted documents as well as validate the compliance with all the necessary requirements by the applicants, with the assistance of the Regional APDS Task Force. Only applications with complete documents under these guidelines may be considered for evaluation.

3.    The Office of the Undersecretary for Finance and Administration, on the basis of the evaluation made by the TWG, may disapprove outright or recommend approval of the application to the Department Secretary. A letter of notification shall be served by the aforesaid Office to the applicants of the action taken thereof.

4.    If approved, a corresponding APDS-MOA shall be executed by and between the Department Secretary and the President or his/her duly authorized representative. Roles and responsibilities of both parties as well as the other terms and conditions of the MOA are enumerated in the attached Enclosure "B", subject to further modification whenever necessary.

5.    Upon approval thereof by the Department Secretary or his duly authorized representative, the APDS-MOA shall be executed by the parties concerned. Accreditation is considered complete only upon signing/execution of the APDS-MOA by the contracting parties.

VIII. EFFECT OF NON RE-ACCREDITATION AND CANCELLATION OF ACCREDITATION

1.    Non-reaccreditation shall result in the denial of the PLI's privilege to transact new business under APDS. The DepEd, however, shall continue servicing the collection of existing loans already incorporated in the payroll system as of the date of the termination of the MOA, and remitting the same to the PLIs until full payment of said loans. Thereafter, the lending code is automatically revoked.

2.    In case of revocation of the Certificate of Registration/Authority of the entity by the IC/SEC/BSP/CDA, the DepEd, shall automatically cancel/revoke the APDS-MOA upon receipt of written notice of revocation from the appropriate government regulatory agency.

IX.    REPEALING CLAUSE

All rules, regulations and issuances, which are inconsistent with these guidelines are hereby repealed or modified accordingly.

X.    PENALTY CLAUSE

Violation of any provision of these revised guidelines or parts thereof shall be dealt with accordingly.

XI.  EFFECTIVITY

These guidelines shall take effect on October 17, 2011.

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