TIL

                             TRUTH IN LENDING ACT

RA No. 3765, AN ACT TO REQUIRE THE DISCLOSURE OF FINANCE CHARGES IN CONNECTION WITH EXTENSIONS OF CREDIT

INTRODUCTION
DECLARATION OF POLICY: It is hereby declared to be the policy of the
State to protect its citizens from a lack of awareness of the true cost of credit to the user by assuring a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy.

Under BSP Circular No. 755 Series of 2012, it is provided that the objective of transparent pricing is not to set limits on rates, but rather to make such rates more understandable, comparable and known to the client. Transparent pricing will facilitate healthy competition among credit providers as clients are better able to compare products and services.

DEFINITION OF TERMS

Board - means the Monetary Board of the Central Bank of the
Philippines
Credit - means any loan, mortgage, deed of trust, advance, or
discount; any conditional sales contract; any contract to sell,
or sale or contract of sale of property or services, either for
present or future delivery, under which part or all of the
price is payable subsequent to the making of such sale or
contract; any rental-purchase contract; any contract or
arrangement for the hire, bailment, or leasing of property;
any option, demand, lien, pledge, or other claim against, or
for the delivery of, property or money; any purchase, other acquisition of, or any credit upon the security of, any obligation of claim arising out of any of the foregoing; and
any transaction or series of transactions having a similar
purpose or effect.

Finance Charge - includes interest, fees, service charges, discounts, and such other charges incident to the extension of credit as the Board may be regulation prescribe.

Creditor/CGEs - means any person engaged in the business of extending credit (including any person who as a regular business practice make loans or sells or rents property or services on a time, credit, or installment basis, either as principal or as agent) who requires as an incident to the extension of credit, the payment of a finance charge.

Under BSP Circular No. 755 Series of 2012, it likewise covers
all entities providing credit that are not covered by
issuances of the BSP, Securities and Exchange Commission,
Insurance Commission and Cooperative Development
Authority are enjoined to comply with and avail of the
incentives of the said Circular. Collectively, they shall be
known as "entit[ies] with credit-granting facilities" or
CGES, which shall include corporations, organizations,
partnerships and single proprietorship registered with the
SEC and the DTI.


Person - means any individual, corporation, partnership,
association, or other organized group of persons, or the
legal successor or representative of the foregoing, and
includes the Philippine Government or any agency thereof,
or any other government, or of any of its political
subdivisions, or any agency of the foregoing.

REQUIRED INFORMATION
Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with rules and regulations
prescribed by the Board, the following information:
1. the cash price or delivered price of the property or service to be acquired;
2. the amounts, if any, to be credited as down payment and/or trade-in;
3. the difference between the amounts set forth under clauses (1) and (2);
4. the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit;
5. the total amount to be financed;
6. the finance charge expressed in terms of pesos and centavos; and
7. the percentage that the finance charge bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation.


Under Section 5 of BSP Circular No. 755, Series of 2012, the following are the required information to be disclosed:
a. the total amount to be financed;
b. the finance charge expressed in terms of pesos and centavos
c. the net proceeds of the loan; and 
d. the percentage that the finance charge bears to the total amount to be financed expressed as a simple annual rate or an effective annual interest rate (EIR). EIR may also be quoted as a monthly rate in parallel with the quotation of the contractual rate.

All registered CGEs shall furnish each borrower with a copy of the disclosure statement, prior to the consummation of the transaction.

The disclosure statements hall be a required attachment to the loan contract and the customer has a right to demand a copy of such disclosure.

Loan Documents and Marketing Materials: All loan-related documents shall show repayment schedules in a manner consistent with BSP Circular No. 755, Series of 2012. Marketing materials and presentations shall likewise be
consistent with the said circular.

Posters: In BSP Circular 730, Series of 2011, it provides that Banks shall post in conspicuous places in their principal place of business and branches, the information contained in the revised format of disclosure statement. The posters shall include an explicit notification that the disclosure statement is a required attachment to the loan contract and the customer has a right to demand a copy of such disclosure. (Section 4)

MANNER OF COMPUTING INTEREST: All registered CGES shall charge interest based on the outstanding balance of a loan at the beginning of an interest period.

For a loan where principal is payable in installments, interest per installment period shall be calculated based on the outstanding balance of the loan at the beginning of each installment period. (Sec. 4 of BSP Circular No. 755, Series of
2012)

REGISTRATION
Under Section 3 of BSP Circular No. 755, Series of 2012, a CGE may register its lending or financing facility with the BSP for the purpose of ensuring compliance with the requirements of the Act. Through BSP-registration, a CGE demonstrates its commitment to corporate social responsibilities and adherence to the law. Registration will allow a CGE to gain greater advantage in promoting and declaring its competitive edge. Further, registration will
build long-term brand value, accountability and transparency, making the registered CGE more valued by its clients and other stakeholders.

To register, they shall submit the following minimum information to the BSP:

1. Business Name
2. Directors, Key Officers and Substantial Stakeholders
3. Principal Place of Business and Contact Details
4. Notarized Deed of Undertaking to strictly and continuously comply with the requirements of all relevant laws, rules and regulations, signed either
by the owner, partner, president or officer of equivalent rank and
5. Such other information or documents that may be required by the BSP.

After due registration and payment of registration fee, an
electronically generated serially numbered Acknowledge of Registration (AOR) shall be issued and shall be valid for a period of 3 years from the date of issuance and
renewable thereafter on the anniversary month when it was originally registered.

The entity shall be allowed to post the BSP-issued AOR and certified true copies thereof in its place of business and branches, if any.

The list of registered CGES shall be published in the BSP website in order to enable the public, its clients/consumers to determine if their counterparty is registered with the BSP, for purposes of determining compliance with the Act and its IRRS.


PENALTIES
a. Any creditor who in connection with any credit transaction fails to disclose to any person any information in violation of this Act or any regulation issued thereunder shall be liable to such person whichever is greater between:
i. in the amount of P100 or
ii. in an amount equal to twice the finance charged required by such creditor in connection with such transaction, upto a maximum of P2,000 on any credit transaction).

Prescriptive period: Action to recover such penalty may be brought by such person within one year from the date of the occurrence of the violation, in any court of competent jurisdiction.

Costs: In any action under this subsection in which any person is entitled to a recovery, the creditor shall be liable for reasonable attorney's fees and court costs as determined by the court.

Except as specified in subsection  above,
a. nothing contained in this Act or any regulation contained in this Act or any regulation thereunder shall affect the validity or enforceability of any contract or transactions.

b. Any person who willfully violates any provision of this Act or any regulation issued thereunder shall be subject to a
i. Fine of not less than P1,00 or more than P5,000 or
ii. Imprisonment for not less than 6 months, nor more than one year or both.

No punishment or penalty provided by this Act shall apply to the Philippine Government or any agency or any political subdivision thereof.

A final judgment hereafter rendered in any criminal proceeding under this Act to the effect that a defendant has willfully violated this Act shall be prima facie evidence against such defendant in an action or proceeding brought by
any other party against such defendant under this Act as to all matters respecting which said judgment would be an estoppel as between the parties thereto.