Scope
Introduction
This directive provides for a loan to employees, on an as-needed basis, normally so that they may purchase items needed at post or to otherwise facilitate the posting. Items may include clothing and foodstuffs and a private motor vehicle, for the employee's use at a post. The intent of FSD 10 is not to fund personal investments.
The employee will be required to identify the purpose of the loan.
Please refer to the Instructions and Guidelines at the end of this Directive for additional information or greater clarification of certain sections.
Directive
10.1 Application
(Note: Refer to Instructions)
10.1.1 A posting loan may be granted to an employee:
(a) who is notified officially in writing of an impending assignment to a post; or
(b) who is on assignment at a post where a posting loan was not granted in anticipation of that assignment; and/or
(c) who has been granted a posting loan and is notified officially in writing of an impending assignment from one post to another post.
10.1.2 Where a loan is approved following notification of posting or cross-posting, the funds may be released to the employee up to 90 days prior to the official date of departure from Canada or from the employee's previous post.
10.2 Maximum Loan Amount
10.2.1 Subject to the discretion of the deputy head and the limitations and conditions of this directive, an employee may be granted an interest-bearing posting loan in an amount not exceeding the lesser of the following amounts:
(a) fifty per cent of the employee's gross annual salary; and
(b) the amount in Appendix A of the Directive, established annually on April 1st in accordance with the methodology agreed to by the National Joint Council Committee on Foreign Service Directives.
10.2.2 Where a loan is granted in accordance with paragraph 10.1.1(c), the maximum amount of the loan shall not exceed the amount available under subsection 10.2.1 at the time of official notification of cross-posting, reduced by the outstanding principal of the previous loan, and repayment shall be in accordance with Section 10.5.
10.3 Maximum Period of Loan
10.3.1 Where a posting loan has been granted in accordance with subsection 10.1.1, the repayment period shall not exceed a maximum of 48 months. Where a posting loan is renegotiated in accordance with paragraph 10.6.1(a), the repayment period shall not exceed a maximum of 48 months from the commencement of the repayment period on the original loan.
10.4 Interest Rate
(Note: Refer to Guidelines)
10.4.1 Where a posting loan or supplementary loan has been approved in accordance with subsection 10.1.1 and/or paragraph 10.6.1(a):
(a) the rate of interest on the initial loan shall be the prescribed rate in effect on the first day of the quarter (i.e., April 1st, July 1st, October 1st, January 1st) in which the loan is approved, such rate being established by the Department of Finance and published on the Department of Foreign Affairs and International Trade's website;
(b) the rate of interest on any supplementary loan shall be the prescribed rate in effect on the first day of the quarter in which the supplementary loan is approved, and where the new loan interest rate on the combined loan shall be a weighted average of the two rates;
(c) the rate of interest shall remain fixed during the period of the loan, subject to the provisions of subsection 10.6.1;
(d) interest shall be calculated and becomes payable two weeks following the day the loan is approved for deposit to the employee's bank account. These two weeks represent the average time from approval to deposit. Any interest owing between the issuance of the loan and the beginning of the repayment period will be added to the principal;
(e) interest shall be calculated on the total outstanding balance of the loan, including any outstanding balance from a previous loan and any supplementary loan amount.
10.5 Repayment Terms
(Note: Refer to Instructions)
10.5.1 Where a posting loan has been granted in accordance with subsection 10.1.1, the loan shall be repaid in equal bi-weekly installments of blended principal and interest. Notwithstanding that interest becomes payable two weeks following the day the loan is approved, at the request of the employee, the repayment start date can be delayed up to the first day of the fourth month following the month in which the loan is approved, or to the first day of the month following the employee's arrival at post, whichever is the earlier.
10.6 Loan Renegotiation
(Note: Refer to Instructions and Guidelines)
10.6.1 Where a posting loan has been granted in accordance with subsection 10.1.1, the employee may:
(a) negotiate a supplementary loan, on one occasion only, for an amount of $1,500 or over, up to the maximum amount that would have been available under subsection 10.2.1 when the original loan was approved. The additional amount would be at the current interest rate for posting loans, and/or
(b) renegotiate the term of the loan to a maximum of 4 years, with no change in interest rate, and/or
(c) renegotiate the loan to reflect a higher loan payment with a corresponding decrease in the term of the loan, with no change in interest.
10.7 Early Repayment
10.7.1 An employee who has been granted a posting loan may partially repay the principal of the loan in a minimum amount of $500 on one occasion only, in which case the rate of interest shall remain unchanged and, upon request, the employee may:
(a) retain the original repayment period, in which case the total bi-weekly amount of blended principal and interest shall be reduced to reflect the reduced principal of the loan; or
(b) reduce the original repayment period, in which case the total bi-weekly amount of blended principal and interest shall be adjusted, as required, in accordance with the applicable repayment schedule, to an amount approximating as closely as possible the total bi-weekly amount prior to the partial repayment of the principal.
10.7.2 After confirming with the deputy head the outstanding balance of a loan, an employee shall have the right, during the term of the loan, to repay the whole of the outstanding principal and interest, with interest calculated to the end of the bi-weekly period in which the loan is retired. Where the employee utilizes this right, there is no further entitlement to any of the provisions of this directive for the duration of that assignment, including any extension of that assignment, until and unless the employee is notified officially in writing of an impending assignment from that post to another post. (See subsection 10.1.2).
10.8 Repayment/Recovery – Other Circumstances
(Note: Refer to Instructions)
10.8.1 Notwithstanding subsection 10.3.1, where an employee who has been granted a posting loan in anticipation of posting is subsequently notified officially that the assignment has been cancelled due to operational requirements as determined by the deputy head, the deputy head may authorize the repayment of the loan under the same terms and conditions as would have applied had the employee proceeded on posting, except that, in cases of financial hardship, the deputy head may consider extending the repayment period beyond 48 months.
10.8.2 Where the employer directs early termination of a posting and the employee's return to Canada and repayment of the loan would cause financial hardship, the deputy head may consider extending the repayment period beyond 48 months.
10.8.3 Notwithstanding subsection 10.3.1, where an employee returns to Canada prior to the termination of the assignment, the deputy head may authorize the continued repayment of the loan and may also extend the repayment period to a maximum of 48 months from the commencement of the repayment period.
10.8.4 Notwithstanding anything in this directive, where an employee:
(a) ceases to be employed before repayment is completed, the outstanding amount of the loan shall be subject to immediate recovery pursuant to the relevant provisions of the Financial Administration Act;
(b) has been granted leave without pay during the repayment period of the loan, the employee shall submit post-dated cheques to cover the bi-weekly payments during the leave without pay period. If no provision is made for settlement of the regular payments, the outstanding amount of the loan shall be subject to recovery pursuant to the relevant provisions of the Financial Administration Act.
Instructions
Instructions for 10.1 - Application
1. A posting loan is normally granted in advance of posting or during the first twelve months of an assignment at a post.
2. A posting loan may be granted following completion of twelve months of duty at a post for reasons acceptable to the deputy head.
3. A posting loan may only be granted during the last twelve months of an assignment at a post in exceptional circumstances for reasons acceptable to the deputy head or where an employee is notified officially in writing of an impending assignment from one post to another post.
4. The employee shall be informed in writing of the terms and conditions of the loan, including the total cost of the loan and the rate of interest charged.
5. Provisions related to the financing of posting loans are contained in Appendix B to this directive.
Instruction for 10.5 – Repayment Terms
Where a loan is granted in accordance with paragraph 10.1.1(c), "principal" is the total amount of the loan which comprises the actual amount received by the employee plus any additional amount required to retire the outstanding principal of the previous loan.
Instructions for 10.6 – Loan Renegotiation
1. The provisions of Section 10.6 are available at any time following approval of each loan, except that, during the last twelve months of an assignment at a post, the supplementary loan may only be granted in exceptional circumstances for reasons acceptable to the deputy head.
2. Where a posting loan has been granted to the maximum amount available under subsection 10.2.1, the employee is not eligible for the provisions of paragraph 10.6.1(a).
3. The provisions of subsection 10.6.1 are not available when a loan has been repaid in full.
Instruction for 10.8 – Repayment/Recovery – Other Circumstances
The terms and conditions referred to in this section are those terms and conditions of repayment which were in effect at the time the posting was cancelled and shall remain fixed until the loan is repaid.
Guidelines
Guideline for 10.4 – Interest Rate
On April 1, 2009, the prescribed rate was the average interest rate on 1-year treasury bills during the first month of the preceding quarter, i.e., January, 2009.
Guidelines for 10.6 – Loan Renegotiation
The total amount available as a combined posting loan and supplementary posting loan is the amount available under subsection 10.2.1 when the initial loan was approved. For example:
1. Maximum amount available: $25,000. Employee is granted a posting loan of $10,000, repayable over two years.
After 10 months at post, employee finds it necessary to purchase a car. Although the outstanding principal has been reduced to $6,000, the loan could only be increased up to the original limit of $25,000, less the original amount issued ($10,000), i.e. a supplementary loan of up to $15,000 would be approved. The new interest rate would be a weighted average based on the outstanding principal at the original interest rate and the supplementary amount at the current rate. For example, if the original rate was 4% and the new rate is 5%, the weighted average would be ($6,000 x .04 + $15,000 x .05)/$21,000 = 4.71%.
2. Maximum amount available: $25,000. Employee is granted a posting loan of $25,000, repayable over four years.
After two years at post, employee has paid off $11,000 of the posting loan, and now applies for a $5,000 supplementary loan. This would not be permissible as employee has already been granted the maximum amount available, i.e., $25,000.