MANILA - The Bangko Sentral ng Pilipinas (BSP) on Friday warned the public against the "sangla ATM" scheme that uses ATM cards as loan collateral.
In an advisory, the BSP said this practice exposes borrowers to identity theft, unauthorized withdrawals and the use of personal data in fraudulent or criminal activities.
"This [Sangla ATM or pawn ATM scheme] may be a quick and easy way to access loans but it is prone to abuses and risks," it said.
In addition, the BSP said the Sangla ATM scheme exposes borrowers to excessive interest rates, lack of formal contract and limited mechanism for filing complaints.
The BSP advised the public to borrow from responsible financial institutions that protect clients' welfare.
It likewise warned financial institutions against the use of ATM cards as collateral since the scheme does not guarantee repayment and worsens the "over-indebtedness" of salaried low-income earners.