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GSIS clarifies application of conso-loan interest rate

Date Posted: November 7, 2013

State pension fund Government Service Insurance System (GSIS) today said that the pension fund has already explained to the Commission on Audit (COA) how the 12% interest rate on the consolidated loan (conso-loan) is being applied.

The conso-loan is a loan program created in 2006 that merged five different loans under one account.

“COA and GSIS differ on the interpretations of our guidelines on the conso-loan program. The payment for the first monthly amortization for the loan will be due only after the three-month grace period following the month of loan granting. If the conso-loan is thus granted in January, the payment becomes due in April, and not in March as COA interpreted,” President and General Manager Robert Vergara pointed out.

Vergara added that as a result of the three-month grace period, the loan will necessarily be extended by three months and not two months, per the understanding of COA.

“Using the same example, the agency payment in fact, will only be remitted to GSIS on the 10th day of the following month, which is May. Note that GSIS should have received the payment in April but we no longer charge additional interest while the payment is in transit,” he added.

GSIS said that the pension fund has always been transparent to its conso-loan borrowers.

“Under the terms and conditions of the conso-loan, the interest rate is 12% and that the fraction of a month will be considered as one month”.

The pension fund chief said the provision has always been stated in the application form and in the GWAPS kiosks.

Further, he said that the governing board of GSIS has issued in September 2012, the guidelines prescribing the disclosure of interest charges on conso-loan accounts for the first three months of the loan term, in compliance with the “Truth in Lending Act”, or Republic Act 3765.

On the overpayment of previous loan and lower proceeds of new loans because of the delayed posting of payment, Vergara explained there is no such overpayment in the case of loan renewal because all unposted payments for the previous loan are being applied against the principal balance of the renewed loan.

“Where there is no existing loan, we will refund the amount to the member,” he said.

In addition, he said that beginning last September, GSIS waived the penalties and surcharges on all renewed and restructured conso-loan accounts of members while in active service.

“For as long as a member is in active service, GSIS will no longer impose a penalty and surcharge for a loan that is due and demandable, that is, with six months arrears.”

Retiring members, on the other hand, will be charged a six percent penalty per annum, if the last conso-loan is due and demandable.