Credit Policy

Version Date: October 1, 2022

Article I

DECLARATION OF POLICY

This policy paper provides guidelines governing the various loan products of the Cooperative. The policy is aimed at securing members’ investments in the Cooperative.

Article II

ELIGIBILITY CRITERIA

The main objective of the Cooperative is to provide benefits to its members. Hence, the loan products are specifically targeted to member needs. However, in order to safeguard members’ investments in the Cooperative, only members in good standing can avail of the Cooperative’s loan products.

To be a member of good standing, the following must be met:

1. The borrower has to be a bona-fide Regular or Associate Member of the Cooperative.
2. The borrower has fully paid the Minimum Share Capital of Five Hundred Pesos (P500.00) and Membership Fee of P200.00.
3. The borrower has no past due loan payments.
4. The borrower has actively contributed to share capital build-up.

Article III

LOAN ENTITLEMENT

1. Regular Members may avail at multiple loan products for as long as they meet the following requirements:

1. No past due balances.
2. Their Share Capital build-up is active for the past three months.
3. The total monthly amortization of both loans will comply with any take-home-pay policy of member’s employer.
4. Total outstanding balance of all loans does not exceed P200,000.00 except when fully secured by Share Capital.
5. The following loans are also exempt from the P200,000.00 outstanding balance limit:
1. • • Petty Cash Loan
     • Emergency Loan
       
       
2. Associate Members may avail of Associate Member Loan up to 100% of their Share Capital contribution.
3. All members are entitled to receive patronage refund from interest payments on their loans.
4. Tenure, Co-Maker, and Share Capital requirements must be met as defined in Article IV.

 Article IV

LOAN PRODUCTS

Section 1. Loan Purpose. The Cooperative’s loan products are designed to meet members’ financial requirements while also safeguarding their investments. Thus, co-makers are required on certain loans as follows:

Note: There will be no Co-Makers needed if total loans (new + outstanding) is less than or equal to the Share Capital of the Member-Borrower.

Section 2. Loan Terms.  The Cooperative’s loan products differ from those offered in the market. They are not available from traditional banking sources, they do not entail expensive credit investigation, and they are processed quickly. Moreover, borrowers earn patronage refunds from their loan interest payments which effectively lowers the Coop’s interest rates further.

Note: Other special loans may be approved by the board from time to time.

Birthday Loan Table

Notes: A member may avail of multiple loans but subject to the following conditions:

• Only one (1) outstanding loan allowed for Petty Cash and Birthday Loan.
• The total outstanding balance of all loans does not exceed P200,000.00 except when fully secured by Share Capital.

Section 3. Tenure Requirement. All members/borrowers need to comply with the following HPPEMC tenure requirement which is dependent on the amount of loan.

Note: Any exception to the above will need HPPEMC Board approval.

Section 4. Interest Rates. The Cooperative’s loan products must be patterned after market rates. This is to ensure the economic viability of the Cooperative. However, these loan products cannot be offered in the formal financial markets because they would be too expensive for these financial institutions to handle. But since the law mandates that annual net surplus of the Cooperative be returned to members in the form of dividends and patronage refunds, this effectively lowers the interest rates. This way, members get the benefit both by being the owners as well as the borrowers of the Cooperative.

Terms, Rates and Conditions are subject to change without notice in the sole discretion of the Cooperative Board of Directors. All amendments to these Terms, Rates and Conditions will be shared to the members through any of the digital communications channel available – email, website, social or media.

Section 5. Interest Rate Discount. To recognize members who have remained in good standing with the Cooperative, a special interest rate discount is given to them based on their Membership Level*.

*Membership Level

• Silver Member – a Member in Good Standing (MIGS) for 0 to <3 years.
• Gold Member – MIGS for 3 to <5 years with continuous patronage of the Cooperative’s loan products.
• Platinum Member – MIGS for at least 5 years with continuous patronage of the Cooperative’s loan products.

**Except for interest-free loans.

Section 6. Retention Fund. As part of the Cooperative’s policy on capital build-up, most of the loans borrowed from the Cooperative require a 10% Retention Fund. This means that the borrower will have to add the equivalent of 10% of the loan into his Share Capital Contribution, payable in equal payments throughout the duration of the loan.

Section 7. Information Security. As the Cooperative is a separate entity from the member’s employer, no employer confidential information including, but not limited to, compensation, capacity to pay, etc., will be shared between employer and the Cooperative. The Cooperative is taking all the risk in giving out loans to its members. As such, to safeguard members’ equity, the Cooperative will require co-makers for its loan products. Co-makers are jointly liable with the Maker (Borrower) of the loan. In case of non-payment of the Maker, the Cooperative may go against the Co-maker to collect payment.

Section 8. Documentation. In addition to the submission of a Loan Application Form, some of the Cooperative’s loan products require additional documentation. This is to ensure responsible use of the Cooperative’s credit facility.

Section 9. Penalties. In addition to interest rate charged on past due balances, the following penalties will be imposed on the borrower for delayed payments:

When past due balances remain unpaid for more than 90 days, the co-makers shall bear the outstanding liability including the interest and penalty charges therein.

When past due balances remain unpaid for more than 120 days, the Cooperative may exercise the option to terminate the borrower’s membership and close the member’s Share Capital Contribution against his/her outstanding balance.

Section 10. Pre-termination and Restructuring. Any loan can be pre-terminated or restructured at any time subject to a surcharge of 3% of the outstanding loan balance.

Section 11. Credit Life Insurance. As a protection for the Cooperative as well as the Borrower, co-makers, and dependents, all loans above Twenty Thousand Pesos (20,000.00) will be secured by a credit life policy which will be for the account of the Borrower. The credit life policy shall be from a reputable insurance company to be identified by the Cooperative.

Section 12. Procedure. The following procedures will be followed when availing of the Cooperative’s loan products:

1. Member to secure a Loan Application Form either online or from the Coop Admin.
2. Member to fill-up the form and submit the accomplished form to the Cooperative.
3. The Cooperative will check for completeness of the loan application as well as the borrower’s compliance to the coop’s policies including, but not limited to, Share Capital Contribution, tenure, and MIGS status, before endorsing the same to the Credit Committee and/or Board of Directors.
4. All compliant loan applications may be approved by at least one member of the Board.
5. All non-compliant loan applications will require special exception approval from the majority of the Board of Directors.
6. The Coop releases the loan proceeds to the borrower’s bank account on record.

This procedure can be completed in 1-2 weeks for most of the loans assuming borrower is compliant with the Credit Policy (e.g. tenure, share capital, etc.). Longer processing period will be needed for loan applications that are not within the Credit Policy as they will require special exception approval from the Board of Directors.

Note: Where the Board has rejected the loan application, the Board is not obliged to provide any reason for such rejection or to respond to any explanation with respect to the decision. Members may, however, appeal for reconsideration within 10 working days and provide additional information for Board consideration.

Article V

RESIGNATIONS

Section 1. Member Resignation. If a member resigns from their employer and/or Cooperative, all loans become due and demandable. The member is given 2 options to settle his/her obligations with the cooperative:

1. For those continuing as Associate Members (i.e. for those resigning from their employer but staying as member of the Cooperative)
   1. Full Payment: The member may pay-off the remaining balance of the loan in full. The 3% pre-termination fee is waived.
   2. Auto Debit: Member may opt to continue the Auto Debit Arrangement until the loan is paid.
   3. Post-dated Checks: Member may issue post-dated checks for the remaining months of the loan.
2. For those terminating their HPPEMC Membership
   1. Full Payment: The member may pay-off the remaining balance of the loan in full. The 3% pre-termination fee is waived.
   2. Auto Debit: Resigning member may opt to continue the Auto Debit Arrangement for a maximum term of 3 months. A 3% restructuring fee will be charged.
   3. Post-dated Checks: Resigning members may issue post-dated checks to pay-off the loan for a maximum term of 3 months. A 3% restructuring fee will be charged.

If the member fails to execute any of the above options after 60 days from date of resignation, the balance of the loan will automatically be transferred to the co-maker/s as stipulated in the Loan Application Form. The Cooperative may opt to apply the member’s capital contribution, dividends, savings deposits, and other receivables to his/her outstanding loans before transferring the remaining obligations to the co-maker/s.

Section 2. Co-Maker Resignation. If a co-maker resigns, the principal borrower will have to get a new co-maker (using the Co-Maker Replacement Form) within 30 days from date of co-maker resignation. Only upon the submission of a Co-Maker Replacement Form shall a resigning co-maker be allowed to withdraw his/her share capital. Furthermore, failure to replace a co-maker shall mean suspension of new loan availments.

Section 3. Procedure. Members must submit the Termination/Associate Membership Form at least 30 days prior to date of effectivity. The Termination/Associate Membership Form may be found under Members Area of the website (login required). Processing time to return member’s share capital (less any outstanding obligations) is 2-4 weeks. For existing comakers, a Co-Maker Replacement is required per Co-Maker Policy (Article IV Section 2) before the return of share capital.

Note: The Cooperative is mandated by RA 9510 to report members’ credit data and behaviors to the Credit Information Corporation or to any other credit information bureaus. A member who is unable to settle his/her obligations to the cooperative may have a negative credit rating which might affect his/her transactions with Philippine banks and financial institutions.