THE Bangko Sentral ng Pilipinas (BSP) warned holders of automated teller machine (ATM) cards not to pawn their cards, as it may result in problems.

“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,” the central bank said in a statement.

“Creditors may also withdraw amounts higher than the cardholders’ debt,” it added.

Pawning ATM cards is a type of unregulated lending system in which the ATM card is used as collateral and the lender withdraws payment for the loan every payday until the total amount is paid back.

The central bank issued the warning as part of its continuing efforts to educate Filipinos on safe and effective money, credit and savings management practices.

The BSP also advises borrowers to understand the terms and conditions of loan agreements to protect themselves against unreasonable demands,” it said.

It urged the public to inquire directly with banks and other BSP-supervised financial institutions for microfinance, personal and other small credit facilities.

Authorized financial institutions include pawnshops, money service businesses, electronic money issuers, and non-stock savings and loan associations.

Meanwhile, BSP Governor Felipe Medalla said the central bank is working with the Securities and Exchange Commission on the regulation of online lending activities to protect the public.