Post-dated checks or PDCs are usually issued to cover future payments in various transactions. PDCs are used for loan and rental payments for residential and commercial units. PDCs are also used for payments in supply agreements and non-loan commercial transactions. Now that the government has imposed a 30-day grace period (see extension of quarantine), what happens to PDCs and the accompanying risk of being charged under the Bouncing Checks Law (Batas Pambasa Blg. 22)?
There can be no general answer to or opinion on this question. So far, the Department of Finance (DOF) has issued the implementing rules for the grant of a 30-day grace period for ALL loans, pursuant to Republic Act No. 11469, also known as the “Bayanihan to Heal as One Act“. This grace period applies during the Enhanced Community Quarantine (ECQ) period. [See Grace Period for Loans Already in Effect and Implementing Rules and Regulations of Section 4(aa) of Republic Act No. 11469, Otherwise Known as the “Bayanihan to Heal as One Act”; see also the updated BSP FAQ clarifying that loans with due dates falling on 1 June 2020 and thereafter are no longer entitled to the 30-day grace period.]
Republic Act No. 11469 and its Implementing Directives also cover rent for residential units. While the 30-day grace period for residential rents is already effective, we are yet to see the implementing rules, if any, to be issued by the Department of Trade and Industry (DTI).
To be liable for violation under the Bouncing Checks Law, the following essential elements must be present:
- (1) the making, drawing, and issuance of any check to apply for account or for value;
- (2) the knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of the check in full upon its presentment; and
- (3) the subsequent dishonor of the check by the drawee bank for insufficiency of funds or creditor dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment.
The 30-day grace period means that the loan or rent is not yet payable and, therefore, the post-dated check should not be deposited or, if deposited, the drawee bank should not process it, which means that there is no occasion for the PDC to be dishonored. With this element missing, there can be no liability under BP 22 for PDCs falling due during the ECQ Period.
It is important to note that any entity which refuses or fails to grant the 30-day grace period is criminally liable under Section 6(e) of RA 11467. This means that the payee of the PDC, who is normally the landlord or the entity which extended the loan, may be charged for violation of RA 11467 in the event that he/she/it deposits the PDC.
The practical problem with PDCs is this — are banks required to check the nature of PDCs before they process it for clearing? In any case, even if the covered PDC is deposited, cleared and dishonored, there is enough basis to argue that there is still no liability for Bouncing Checks under BP 22.
The grace period covers only loan transactions and rental payments for residential units. The grace period does not cover other transactions, such as non-loan commercial transactions and rent for commercial units.
Update: The Department of Trade and Industry (DTI) subsequently issued the guidelines for the 30-day grace period for rents, covering both residential and commercial rents (see Grace Period for Rents (Residential and MSMEs) during the Enhanced Community Quarantine). There is an interesting provision in the DTI Memorandum Circular No. 20-12, which reads: “Lessors are not obligated to refund residential and commercial rents paid by the lessees during the period of the quarantine. In such case, the lessor shall grant a minimum of 30-day grace period from the next due date of the residential/commercial rents without incurrent interest, penalties, fees, and charges.” If we harmonize all the provisions, we will have the following scenarios:
(a) If the rent was paid in cash, the lessee cannot ask for a refund, but the 30-day grace period shall be applied in the next month.
(b) If there is a PDC for the rent and the lessor deposited it before the effectivity of the grace period requirement (or if the lessee does not object or, pursuant to MC 20-12, does not signify the intention to avail of the grace period), then (a) applies.
(c) If the lessor deposits the PDC after the effectivity and the check is cleared, then we will have to grapple with the issue whether the lessor is criminally liable for failure to grant the 30-day grace period. This liability is explicitly provided in RA 11469.
(d) If the lessor deposits the PDC and the check bounces (the lessee issued a “stop payment order” or the account is insufficiently funded), then the discussions above, with respect to PDCs for loans, applies.
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