The decision of the Department of Education (DepEd) to suspend its Automatic Payroll Deduction System (APDS) for loans and insurance payments is feared to create a ripple of negative effects impacting private lending institutions (PLIs), insurance firms and the 250,000 public-school teachers (PSTs).

The DepEd formalized the decision with the issuance of a memorandum signed by Education Undersecretary for Finance Victoria L. Medrana Catibog informing all its personnel that the agency is terminating the APDS.

Insurance Commissioner Dennis B. Funa said the termination of its agreement with the DepEd for the APDS would adversely affect the insurance industry.

“It [the impact] will not be good, so that should be addressed,” Funa told the BusinessMirror in a text message. “I will discuss this with the affected insurance companies. Then we will decide what action to take,” Funa added.

Also, in an in interview with the BusinessMirror, the Philippine Public School Teachers Association (PPSTA) said it will not be able to accommodate new applications anymore for its Sariling Sikap Loan (SSL) program because of the new DepEd policy.

PPSTA Regional Operations Department Head Dillon B. Arante explained that this is because they will have no reliable means of collecting the regular amortization for the SSL without the APDS.

He pointed out that they stopped granting SSLs as early as November 2017, when the DepEd informed them it will be implementing the new policy.

“Because of this, we received so many complaints from our members on why we cannot approve their [Sariling Sikap] loans,” Arante said.

PPSTA is a nonstock, nonprofit organization that provides insurance and loan services to its 250,000 members through accredited PLIs and insurers.

Until the APDS is resumed, Arante said their members would either have to open up a checking account to avail themselves of the SSL or settle for an equity loan.

Neither, Arante noted, is an attractive alternative, since very few PSTs have checking accounts, while the equity loan, will only allow their members to loan an amount equal on their current contributions.

“If there is a salary deduction, they could get a high as much as P350,000, as long as they have the capacity or have the necessary net pay for it,” Arante said.

ON March 6 Catibog issued an advisory, a copy of which was obtained by the BusinessMirror, stating they will no longer accept nor incorporate new billings for insurance premia, savings deposits and mutual aid system membership fees until further notice.

The issuance, however, noted that the DepEd will continue with salary deductions already incorporated in its payroll until their respective termination dates.

Catibog said this is to ensure that the existing insurance policies, membership and benefits of DepEd personnel will not be disrupted.

She said this is pursuant to the Veto Message of President Dutete on Section 48, “authorized deductions,” of the 2018 General Appropriations Act (GAA), reminding government agencies to secure the most favorable terms for government employees.

When sought for clarification via e-mail, Catibog’s office merely answered: “The Office of the Undersecretary for Finance confirms the issuance of the attached advisory.”

According to the DepEd, the March 6 advisory will remain in effect until the appropriate government agency, or Congress, could provide them guidelines on authorized deductions.

It said this is necessary since some lawmakers insist the manner of payment of loans for PSTs should be based on how it is listed in Section 48 of the GAA.

Foremost on the list are the Bureau Internal Revenue (BIR), Philippine Health Insurance Corp., Government Service Insurance System and Home Development Mutual Fund.

It is followed, respectively, by nonstock savings and loan associations and mutual development associations duly operating under existing laws, and cooperatives which are managed by and/or for the benefit of government employees; associations or provident funds organized and managed by government employees for their benefit and welfare; government financial institutions authorized by law and accredited by appropriate government regulating bodies to engage in lending; licensed insurance companies; and thrift banks and rural banks accredited by the Bangko Sentral ng Pilipinas.

In the previous administrations, the DepEd used the “first in, first served” rule in the payment for
the APDS.

The order of payment is crucial, especially in the case of PSTs with multiple loans, since it will determine which agencies will be immediately paid, and which will have to wait on the next pay day to be compensated.

PPSTA, one of the organizations to be affected by the DepEd’s March 6 issuance, expressed its concern over the new APDS policy since it could negatively affect the long-term viability of its operations.

Arante said it hampers them  from recruiting new members, which, he added, is necessary in order for them to expand their services.

“We keep on texting them [applicants] on how they are going to deposit their P120 premium directly to banks or through our regional offices…. Some of them would say they are no longer interested since it will require them to exert more effort,” Arante said.

He added this is even more problematic to PSTs based in isolated areas, where there are limited access to banks.

“That is why we want to bring back salary deduction because we are also catering to teachers from remote areas…if anything would happen to them, they will be insured,” Arante said.

He also disclosed the issuance will prevent them from renewing the membership of PSTs, who transferred to a new division or became inactive over the years.

He said this will contribute to the drop in their membership in the long run.

“We are like a candle, which is now slowly wasting away. In the end, it is our members who will suffer,” Arante said.

The PPSTA disclosed it is now planning to have a meeting with DepEd officials next month to ask them to repeal the March 6 advisory.

“We are also considering coming up with a position paper from our Board of Trustees asking the DepEd and the lower house to review the policy,” he added.

For its part, the Act Teachers party-list said it will call on the House of Representatives to look into the issue.

“We recently filed House Resolution 1753 calling for an inquiry into the Deped policy on private loans of its personnel, including the issues of accreditation and automatic deduction,” Party-list Rep.Antonio L. Tinio of Act Teachers said in a text message.

“We’re hoping that this will be taken up in committee as soon as possible,” he added.

To recall, the DepEd started looking into implementing tighter regulations for its loans and fees following its report in October 2017 that PSTs owe more than P300 billion from public and private lending institutions.

Based on its initial study, the DepEd attributed the trend to the poor spending habits and lack of financial literacy of PSTs.

The PPSTA opposed DepEd policies to restrict loan access for teachers, stating overborrowing is a consequence of the insufficient pay of PSTs.

“The solution to the financial needs of our public-school teachers is really to increase the salary of our teachers. That is why we are supporting the P30,000 entry-level salary for them,” Arante said.