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Republic of the Philippines 
House of Representatives 
Quezon City, Metro Manila 
Nineteenth Congress 
First Regular Session 
HOUSE BILL NO. _____ 
Introduced by Representative Rudys Caesar G. Fariñas I 
EXPLANATORY NOTE 
This proposed measure seeks to protect government employees from risk against 
automatic payroll deductions. This bill distinguishes the authorized deductions 
due in accordance with law. On the other hand, this bill enumerates prohibited 
acts that allow for private lending institutions (PLIs) to operate and automatically 
deduct from the salaries and benefits due to government employees.  
This bill also introduces a buy-out scheme to assist government employees with 
existing PLI loans. The Land Bank of the Philippines shall assume the existing 
loans due through a one-time payment to PLIs. 
Hence, the passage of this measure is sought.   
RUDYS CAESAR G. FARIÑAS I 
March 6, 2023
5:22 pm
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Republic of the Philippines 
House of Representatives 
Quezon City, Metro Manila 
Nineteenth Congress 
First Regular Session 
HOUSE BILL NO. _____ 
Introduced by Representative Rudys Caesar G. Fariñas I 
AN ACT 
PROHIBITING THE PRIVATE LENDING COMPANIES FROM COLLECTING 
LOAN PAYMENTS OF GOVERNMENT EMPLOYEES THROUGH AUTOMATIC 
PAYROLL DEDUCTION 
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled: 
SECTION 1. Authorized Deductions. – Deductions from the salaries and other 
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benefits accruing to any government employee may be allowed for the payment 
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of obligations and contributions due to the following: 
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a. The Bureau of Internal Revenue, Government Service Insurance System,
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Home Development Mutual Fund and the Philippine Health Insurance
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Corporation;
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b. Non-stock savings and loan associations and mutual benefits associations
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duly operating under existing laws which are managed by, and for the
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benefit of, government employees;
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c. Associations, cooperatives, or provident funds organized and managed by
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government employees for their benefit and welfare;
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d. Government financing institutions authorized by law and accredited by
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appropriate government regulating bodies to engage in lending;
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e. Duly licensed insurance companies accredited by national government
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agencies; and
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f.
Thrift banks and rural banks accredited by the Bangko Sentral ng
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Pilipinas;
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g. Other deductions as may be authorized by law.
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In no case shall the foregoing deductions reduce the employee’s monthly net take 
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home pay to an amount lower than Three thousand five hundred pesos 
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(3,500.00). 
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SEC. 2. Prohibited Acts. – Except for the deductions enumerated in Section 1 
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hereof, it shall be unlawful for any authorized finance, salary-disbursing or 
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payroll officer of any government office to: 
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a. Accredit private lending institutions (PLIs) for the purpose of  allowing 
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these lending institutions to collect loan payments from a government 
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employee through automatic payroll deduction; 
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b. Automatically deduct from the salaries and other benefits accruing to a 
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government employee, the payment of loans from PLIs; 
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c. Conduct private lending activity in the government office; 
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d. Withhold the salary of a government employee in consideration of a loan 
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from PLIs; and 
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e. Disburse to a government employee an amount less than the salary 
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corresponding to a specific pay period in consideration of a loan from PLIs. 
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For purposes of this Act,  private lending institution (PLI) refers to a corporation 
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engaged in granting loans from its own capital funds or from funds sourced from 
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not more than nineteen (19) persons but excluding banking institutions, 
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investment houses, savings and loan associations, financing companies, 
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pawnshops, insurance companies, cooperatives and other credit institutions 
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already regulated by law.  
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SEC. 3. Penalties. – The authorized finance, salary-disbursing or payroll officer 
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of a government office who shall commit any of the acts prohibited under Section 
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2 of this Act shall, for the first offense, suffer the penalty of suspension from 
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office for a period of six (6) months and a fine equivalent to twice the salary of 
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that erring government officer.  For succeeding offenses, the erring government 
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officer shall suffer the penalty of dismissal from the government service and a 
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fine of Two hundred thousand pesos (P200,000.00). 
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SEC. 4. Buy-out loan scheme. – In order to assist the government employees in 
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the payment of loans from the PLIs, the government office shall execute a 
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memorandum of agreement with the Land Bank of the Philippines (LBP) in order 
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for the latter to assume the existing loans of the government employees.  
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Consistent with the principle of non-impairment of contracts, the LBP shall make 
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a one-time payment of the existing loans of the government employees to PLIs. 
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To avail of the buy-out loan scheme, the government employees shall accomplish 
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a loan application form authorizing LBP to: 
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a. Issue a check payable to the PLI representing the outstanding balance of 
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the loan; 
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b. Remit the check payment directly to the PLI; 
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c. Receive the official receipt and certificate of full payment from the PLI; 
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d. Withhold the release of the net loan proceeds pending its receipt of the 
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official receipt and certificate of full payment from the PLI; and 
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e. Deduct from the payroll or receive postdated checks from the employees 
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representing the new amortizations for the employee’s loan from PLIs 
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which are assumed and restructured by LBP. 
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SEC. 5. Qualifications. – A government employee is qualified to avail of  the LBP 
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buy-out loan scheme if the employee: 
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a. Holds a permanent status and is in the government service for at least one 
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(1) year except for appointive officials and their co-terminous appointees; 
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b. Has an existing ATM payroll account with the LBP Branch nearest to the 
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place of work and where proceeds of loan shall be credited or loan 
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payments shall be debited; 
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c. Receives a Monthly Net Take Home Pay (MNTHP) of not less than Three 
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thousand five hundred pesos (P3,500.00) or such amount as may be 
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prescribed by the General Appropriations Act in effect at the time of the 
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loan application; 
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d. Has no pending administrative or criminal case; 
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e. Is eighteen (18) to sixty-two (62) years of age at the time of loan application; 
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and 
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f. Has no pending application for retirement or not due for retirement within 
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the term of the loan. 
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The head of government office whose age is above the maximum requirement 
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may be accommodated, provided a special insurance coverage through 
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Landbank Insurance Brokerage, Inc. (LIBI) is approved and the special insurance 
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premium coverage for the whole terms of the loan is paid. 
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SEC. 6. Implementing Rules and Regulations. – The Securities Exchange 
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Commission, the Bangko Sentral ng Pilipinas and the Civil Service Commission 
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shall, within thirty (30) days from the effectivity of this Act, issue the necessary 
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rules and regulations for the implementation of this Act. 
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SEC. 7. Separability Clause. – If any provision of this Act is subsequently 
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declared invalid or unconstitutional, other provisions which are not affected shall 
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remain in full force and effect. 
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SEC. 8. Repealing Clause. – All laws, decrees, orders, rules and regulations, 
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and other issuances, or parts thereof inconsistent with the provisions of this Act 
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are repealed or modified accordingly. 
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SEC. 9. Effectivity. – This Act shall take effect fifteen (15) days after its 
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publication in the Official Gazette or in a newspaper of general circulation. 
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Approved, 
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