Why 'sangla-ATM' is bad news


Posted at May 22 2023 06:49 PM

When you need cash, and you need it urgently, you could be forced to make some unwise decisions including taking out a loan with high interest rates, or worse, giving up your ATM card as collateral.

The Bangko Sentral ng Pilipinas (BSP) recently warned the public against the latter, or the “sangla-ATM” schemes. In this scenario, a borrower is required to turn over to the creditor his or her physical ATM card and also the Personal Identification Number (PIN) to serve as collateral for loans.

According to the BSP advisory: “This scheme may lead to financial troubles for cardholders as it may be difficult for them to monitor withdrawals made by people to whom the ATM card and PIN were given. Creditors may also withdraw amounts higher than the cardholders’ debt.”

While all these are true, I am more concerned about the timing of the advisory. Have more Filipinos fallen for these schemes and are now trapped in debt?

“Sangla-ATM” is actually not new. This predatory lending practice has been around for at least six years if not longer, which prompted BSP back in 2018 to also issue a similar warning to consumers. However, at that time, BSP also admitted during a hearing of the Senate committee on banks, financial institutions and currencies that is it not illegal. No wonder the practice continues, and may have escalated prompting another round of reminders from the BSP.

If you are being tempted to pawn your ATM to access quick cash, consider these warnings to help you say no.

#1 Remember the P in PIN?

The P stands for Personal, which means the Identification Number should be known only to you. When you use your ATM card as loan collateral, the debtor will also require that you give your PIN. Effectively, you have transferred the “ownership” of your account to your debtor. 

#2 Identity theft can easily follow

This has sadly happened to many “sangla-ATM” clients. Having provided all their personal information to apply for the loan, and then given their ATM and PIN to their creditor, they became vulnerable to identity theft. Some later found out there were credit card applications made using their account information and definitely without their consent. 

#3 “Sangla-ATM” lenders are practically “black market” creditors

BSP’s warning makes specific mention of the status of the “sangla-ATM” creditors. These lenders “are not authorized by any government agency, so there is limited mechanism for you to file complaints or request for restoration of losses.” So it’s a case of borrower beware, as the government cannot help you if or when something grows wrong.

#4 Expect to be charged “excessive” interest rates

Because you are dealing with a creditor that is not government regulated, they can set any interest rate as long as you are willing to accept it. You can be charged not only high rates, but even excessive rates that will make it very difficult for you to repay the loan, if not impossible. 

#5 You’re hit with a double whammy of high rate plus collateral

Government-regulated financial institutions understand that if a borrower provides collateral for a loan, the interest rate will be lower. For loans without collateral, such as credit card debt, the interest rate is higher because they are taking a risk on the client not paying them back. In the case of “sangla-ATM”, borrowers are being asked to provide collateral and also charged high or excessive interest rate. That’s an offer anyone should run away from, and fast.


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