VICTORIA PUBLIC MARKET STALLHOLDERS
CREDIT COOPERATIVE
Victoria Public Market, Brgy. San Gavino, Victoria, Tarlac
Policy Title: COLLECTION POLICY Approved by:
Board Resolution No.
Coverage : All Staff Effectivity Date:
Revision No.
The purpose of this policy is to ensure quality loan portfolio by merely decreasing portfolio at
risk/past due accounts thru precautionary measures.
SECTION 1: OBJECTIVES. The basic objectives behind establishing this policy are as
follows:
1.1. To equip staff involved in the collection area a “concrete guidelines” to follow for
every circumstance.
1.2. To create/formulate collection techniques from one individual cooperative-
member to another.
1.3. To institute immediately and firmly a collection procedure once an endeavor has
been made on the League’s part to assist the member-cooperative and it has not
responded.
1.4. To guide the management to be diligent in the collection and recovery of the loans
it makes to insure not only the safety and soundness of the League, but to protect
all primary member-cooperatives in good standing.
SECTION 2: DELINQUENCY-COLLECTION TIMETABLE
Days
Action Follow-Up
Delinquent
Within 7 First Notice to be sent “A The Management will generate delinquency
days Reminder” notice.
Second Notice to be sent “Have The Loan Department again will generate
you Forgotten?” If payment is the second letter encouraging the borrower
15 days not made within 15 days after the to bring the account up to date. Penalties
initial telephone call or reminder imposed for late payment, and future
letter. collection efforts are detailed in this letter.
30 days
The delinquent loan will be The Loan Department enters the total loan
entered on the delinquency balance in the delinquency schedule
schedule. classification of 1-12 month delinquent.
The collection staff will follow-up. Direct
contact is made with the member.
Third Notice will be sent stating Delinquent member-cooperative is given 20
After the “May we have your Past-Due days from date of mailing to clear account.
30th day Payment?” to cooperative Verbal follow-up contact continues at least
member-borrower. every other day, until the delinquency is
resolved.
*The Manager/Loan The Management, CreCom and/or the BOD
Officer/CreCom may take shall determine appropriate action under
After 20 appropriate action under this this policy.
days Policy including repossession, and
other collection action including
filing of legal case.
Issue the final notice “This is The Management, CreCom and/or the BOD
After 45
your final chance.” Meet the meet the member to find out the problems.
days
member-cooperative. At this point there should be repayment
arrangement agreed upon.
At this stage, legal action should The designated personnel/officer shall
begin. When no security is held, identify potential losses to ensure that
legal action to recover the loan proper valuation is reported to
balance shall commence on any management and Board of Directors.
account when no acceptable
60-90 days
installment arrangement has been The Management, CreCom and/or the
made. In special circumstance, if BOD apply appropriate action, in
a member-cooperative has failed failure of the formal workout agreement
to respond, action may be taken according to the policy.
earlier.
Turn over account to attorney or Lawsuit, claim and delivery, foreclosure
After 90
collection agent, if any. and further collection efforts, claim other
days
assets under the name of the coop-member-
borrower.
If loan has not been repaid, loan The Loan Officer makes recommendation
charge-off should be considered. through the League Manager on the loan to
365 days
be charged off based on the policy. (Make
sure all efforts are exerted upon),
*Note: Repossession or other appropriate action may be taken earlier when necessary to protect
collateral in accordance with this Policy and applicable law.
SECTION 3: RESPONSIBILITY OF COLLECTION
3.1. The responsibilities of the League’s assigned personnel and management are as
follows:
3.1.1. The League Manager shall be responsible for seeing that the Credit and
Collection Committee/Loan Officer follows the rules, practices and
procedures set forth in this Policy; that this Policy is periodically
reviewed and updated or amended; and that the Credit and Collection
Committee/Loan Officer provides all reports when required.
3.1.2. CreCoM/Loan Officer shall be responsible for undertaking the collection
practices and procedures set forth in this Policy. CreCoM/Loan Officer
shall report to the Board/League Manager; be familiar with this Policy;
and conduct themselves pursuant to the rules and code of conduct set
forth in this Policy and other League guidelines.
3.1.3. The assigned staff/Committee Officer shall be provided comprehensive
and appropriate internal and external training to insure compliance with
this Policy, applicable laws and regulations, and an effective working
knowledge of approved collection techniques, which shall be reviewed
and updated periodically.
SECTION 4: PRIORITY COLLECTION ACTIVITY. The Credit and Collection
Committee/Loan Officer will prioritize its collection efforts and follow the practices set forth in
this Policy. The League has established the following priorities for collection actions:
4.1. First Payment Defaults. A default on a member’s first payment should be
resolved quickly to protect the cooperative and any collateral securing the loan.
Such a default may merely reflect an error or misunderstanding by the member,
which should be quickly resolved to insure that such defaults do not continue. On
the other hand, such defaults may indicate bad faith or fraud by a member who
has no intention of repayment. Such cases should be resolved immediately and
action should be quickly undertaken.
4.2. Term Loans. The first accounts, which should be looked at, are term loans i.e.
check rediscounting, which will be paid on the due date. The originating loan
officer should note on his/her calendar to check the note a few days after the due
date. A timely telephone call or short reminder notice prior to the due date
usually avoid the account to become due/delinquent.
4.3. Loans other Than the Above.
4.3.1. Early contact from Credit Committee/Loan Officer is necessary to let
member know that the account is closely monitored.
4.3.2. Always initially approach each member-cooperative with the idea that
they are good and responsible borrower. Do not convey ideas to the
member-cooperative that the League does not trust them or may become
defensive and difficult to work with.
4.3.3. Once a contact is made with the member-cooperative, give them the date
by which the payment will need to be made.
4.3.4. If a member-cooperative promises to make a payment by a certain date, be
sure that this is documented, and follow-up is made thereafter.
4.3.5. If commitment is not met, a constant eye should be kept on the value and
condition of the collateral, if there is any. Oftentimes, collateral will be
depreciating while the loan pay-offs is increasing as interest is added.
4.3.6. If the loan becomes over 60 days delinquent, more serious action should
be taken. Legal action may be required.
4.3.7. The above suggested order of attention to collection efforts basically
pertains to delinquencies that are 15-30 days past due. If an account
proceeds past that initial stage, continuous monitoring of the account is
necessary. Do not just look at the “problem” account after each new
delinquent list is received. Weekly or daily review is sometimes necessary
once an account becomes two or more payments past due.
SECTION 5: INSTALLMENT ARRANGEMENT (RENEGOTIATION OF LOANS)
5.1. Recommendation from the approving authority shall be prepared for Board
approval on cases where re-negotiations/arrangements of loans are solicited.
5.2. The following guidelines shall be observed in making the arrangement.
5.2.1. If the installment arrangement is less than the agreed repayment rate
specified on the loan agreement the arrangement shall be:
5.2.1.1. Reviewed after a period of 6 months.
5.2.1.2. Ratified by the Board if approved under delegated authority.
5.2.2. The member-cooperative shall be informed in writing of the conditions of
the arrangement, insisting that the loan will revert to the original
contract should the arrangement be breached. The member-cooperative
shall sign a copy of the letter in acknowledgement of acceptance of the
conditions specified. The League shall hold the copy.
5.3. When conditions of an arrangement are not fully met within seven (7) calendar days
of the special date, the account shall be deemed to be in breach of the
arrangement, and proceedings for the collection of the loan shall commence.
5.4. The Board of Directors may declare an account current and vary the agreed
repayment rate if an installment arrangement has been maintained for a period of
6 months or more provided that the term of the rearrangement did not exceed the
maximum permissible term within the limitations of the League’s rules from the
date of the original agreement.
SECTION 6: CHARGE-OFF LOANS AGAINST ALLOWANCE FOR LOAN LOSSES
6.1. Uncollectible loans are charged-off vs. Allowance for Probable Loan Losses on a
monthly basis, only after the following actions/attempts are made to collect these
bad debts.
6.1.1. Credit letters, demand letters are sent and received, or via courier but no
payments are received.
6.1.2. Representatives and Officers are cannot be located, and there has been
no contact for a period of 1 year.
6.1.3. Baranggay help was already asked to collect but to no avail.
6.1.4. Attempt to acquire assets from the delinquent borrower but did not
succeed.
6.1.5. After all actions are exerted to collect but no positive results.
6.2. The Management should recommend to the Board the loans to be charged-off as
they occur.
6.2.1. Any loan where the cooperative member-borrower or any from its
authorized representatives and Officers cannot be located, and there has
been no contact for ninety (90) days. It is important to document all
contacts.
6.2.2. Any loan that is more than twelve (12) months delinquent and no
payments have been received for six (6) consecutive months.
6.2.3. Any loan that has been assigned to a collection agency or attorney.
6.2.4. Any loan that is not secured (by cross-collateralization or otherwise),
and upon which no payment has been received for six (6) consecutive
months.
6.2.5. Any deficiency balance on a loan upon which no payment has been
received and no possible course of action appears to be feasible or
warranted.
6.3. Any loan meeting the above criteria that is not expected from charge-off by the
Board of Directors should have the reason for not being charged-off noted in the
Board of Directors’ minutes.
6.4. Charging-off a loan does not mean that the accounts should be forgotten. The
loan is still an asset of the League even though it is not so reflect on the books
because of its doubtful value.
6.5. The majority of the charged-off loans (except bankruptcies) should be assigned to
a collection agency or other legal means of collection upon charge-off
authorization.
6.6. Charged-off loans should be reviewed from time to time (including those loans
assigned to a collection agency for assessing outside efforts for possible
recoveries) to determine whether there is a change in the payment ability of the
cooperative member-borrower or other party responsible.
SECTION 7: ASSET VALUATION ALLOWANCE
7.1. PFCCO-Central Luzon should determine an adequate and reasonable Allowance
for Probable Loan Losses (APLL), which must result in the fair representation of
the financial statements in accordance with the Generally Accepted Accounting
Principles (GAAP), and thereby meet the requirements for full and fair disclosure.
7.2. The following provision for Allowance for Probable Loan Losses should be
calculated as follows:
7.2.1. For loans delinquent for 1 month to 12 months – 35%
7.2.2. For loans delinquent for more than one year – 100%
SECTION 8: ACCRUALS OF INTEREST AND OTHER CHARGES
No accrual of loan interests shall be recognized on the books of accounts, until any
account in the following circumstances:
8.1.1. Closure/Bankruptcy of a member-cooperative, provided that the
security/collateral offered is sufficient enough to meet the terms and
conditions of the loan contract; or
8.1.2. Judgment has been obtained for the principal amount outstanding; or
8.1.3. When the account has been passed to a collection agent.
A member shall at all time remain liable for the repayment of any suspended interest and
the League Manager shall ensure that every reasonable effort is made to collect
such interest.
The League Manager shall reinstate charges on an account when considered necessary.
SECTION 9: SETTLEMENT OF LOAN AT LESS THAN BALANCE OUTSTANDING.
The Board of Directors may at their discretion accept an amount less than the total amount owing
if it is appropriate under all circumstances prevailing at the time. It is anticipated that a
concession such as this should be on the basis of an immediate cash settlement. Such settlements
shall not normally be less than two thirds (2/3) of the amount owing and preferably not less than
three-quarter (3/4). The Board of Directors shall ratify all such settlements.
SECTION 10: EXTERNAL COLLECTION AGENTS. The League’s collection
agent/legal retainer will be ____________________________ Law Office/Collection Agency.
The League Manager or his/her nominee shall be the authorized officer in relation to any court
actions instituted by the League to recover loan outstanding.
SECTION 11: REPORTS. Management should submit Monthly Report of Delinquency to the
Board.
