truth_in_lending_act.pdf

7/28/2019 Truth_in_lending_act.pdf

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Appendix J

TRUTH IN LENDING ACT

(Republic Act No. 3765)

Information to be disclosed

Credit cooperative shall furnish to each person to whom credit is extended, prior to theconsummation of the transaction, a clear statement in writing setting forth the followinginformation to be disclosed:

a) The charges, individually, which are paid or to be paid by borrowers in connection withthe transaction but which are not incident to the extension of credit;

b) The total amount to be financed;c) The finance charges expressed in terms of pesos and centavos; andd) 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.

The contract covering the credit transaction, or any other document to be acknowledged and signed by

the debtor, shall indicate the above seven (7) items of information. In addition, the contract or documentshall specify additional charges, if any, which will be collected in case certain stipulations in the contractare not met by the debtor.

In case the seven (7) items of information mentioned are not disclosed in the contract covering the credittransaction, all of the seven (7) items, to the extent applicable, shall be disclosed in another document inthe form (Appendix K) prescribed by the Monetary Board, to be signed by the debtor and appended to themain contract. A copy of the disclosure statement shall be furnished the borrower.

Definition of terms

a) Creditor(who shall furnish the information) means any person engaged in the business ofextending credit (including any person who as a regular business practice makes loans orsells or rents property or services on a time, credit or installment basis, either as principalor as agent), who requires as an incident to the extension of credit, the payment of afinance charge.

The term creditor shall include, but shall not be limited to, banks and banking institutions,insurance and bonding companies, savings and loans associations, credit unions, financingcompanies, installment houses, real estate dealers, lending investors, pawnshops, and any otherperson or entity engaged in the business of extending credit who requires as an incident to theextension of credit, the payment of a finance charge.

b) Person means any individual, partnership, corporation, cooperative, or other organizedgroup of persons, or the legal successor or representative of the foregoing, and includesthe Philippine Government of any agency thereof, or any other government, or any of itspolitical subdivisions, or any agency of the foregoing.

c) Cash price or delivered price, in case of trade transactions, is the amount of money whichwould constitute full payment upon delivery of the property (except money) or servicepurchased at the credit cooperatives place of business. In the case of financialtransactions, cash price represents the amount of money received by the debtor upon

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Appendix J

consummation of the credit transaction, net of finance charges collected at the time thecredit is extended (if any).

d) Downpayment represents the amount paid by the debtor at the time of the transaction inpartial payment for the property or service purchased.

e) Trade-in represents the value of an asset, agreed upon by the credit cooperative anddebtor, given at the time of the transaction in partial payment for the property or servicepurchased.

f) Non-finance charges correspond to the amounts advanced by the credit cooperative foritems normally associated with the ownership of the property or of the availment of theservice purchased which are not incident to the extension of credit. For example, in thecase of purchase of an automobile on credit, the creditor may advance the insurancepremium as well as the registration fee for the account of the debtor.

g) Amount to be financed consists of the cash price plus non-finance charges less the amountof the downpayment and value of the trade-in

h) Finance charge represents the amount to be paid by the debtor incident to the extension ofcredit such as interest or discount, collection fee, credit investigation fee, attorneys feeand other service charges. The total finance charge represents the difference between (i)the aggregate consideration (downpayment plus installments) on the part of the debtor,and (ii) the sum of the cash price and non-finance charges.

i) Simple annual rate is the uniform percentage which represents the ratio, on an annualbasis, between the finance charges and the amount to be financed.

In the case of single payment upon maturity, the simple annual rate (R) in percent is determinedby the following method:

R = Finance charge X 12 X 100

Amount to be Total number ofFinanced payments plus one

In the case of the normal installment type of credit of at least one (1) year in duration, whereinstallment payments of equal amount are made in regular time periods spaced not more thanone (1) year apart, the simple annual rate,in percent is computed by the following method:

R = 2 X Finance charge X No. of payments X 100in a year

Amount to be Total number ofFinanced payments plus one

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In cases where the credit matures in less than one (1) year (e.g. installment payments are requiredevery month for sic (6) months), the same formula will apply except that number of payments in ayear would refer to the number of installments periods, as defined in the credit contract, as if thecredit matures in one (1) year. For example, number of payments in a year would be twelve (12) forthis purpose in cases where six (6) monthly installment payments are called for in the credit

transaction.

In cases where credit terms provide for premium or penalty charges depending on, say, the timeliness ofthe debtors payments, the annual rate to be disclosed in writing shall be the rate for regular payments,i.e. the premium and penalty need not be taken into account in the determination of the annual rate.Such premium or penalty charges shall, however, be indicated in the credit contract.

Scope of Requirements. The foregoing regulations shall apply to all creditors engaged in the followingtypes of credit transactions:

1. Transactions covered:

a) Any loan, mortgage, deed of trust, advances and discounts;b) Any conditional sales contract, any contract to sell, or sale or contract of sale ofproperty or services, either for present or future delivery, under which, part orall of the price is payable subsequent to the making of such sale or contract;

c) Any option, demand, lien, pledge, or other claim against, or for delivery of,property or money;

d) Any purchase, or other acquisition of, or any credit upon the security of, anyobligation or claim arising out of any of the foregoing; and

e) Any transaction or series of transactions having a similar purpose or effect.

2. Transactions not covered. Considering that the specific purpose of the law is the full disclosure of thetrue cost of credit, the following categories of credit transactions are outside the scope of theseregulations:

a) Credit transactions which do not involve the payment of any finance charge by the debtor; andb) Credit transactions in which the debtor is the one specifying a definite and fixed set of credit

terms such as bank deposits, insurance contracts, sale of bonds, etc.

Inspection of contracts covering credit transactions.

Credit cooperatives shall keep in their office or place of business copies of contracts which involve theextension of credit and the payment of finance charges therefore. Such copies shall be available forinspection or examination by the appropriate supervising and examining department of the BSP or theirduly authorized deputies

Posters

An abstract of R.A. 3765 otherwise known as the Truth in Lending Act shall be reproduced in a formatwhich is sixty (60) cm. wide and seventy-five (75) cm. long and posted on a conspicuous place in thecredit cooperatives place of business.

Penal Provisions

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Appendix J

a. Any creditor who in connection with any credit transaction fails to disclose to any person anyinformation in violation of this Section or any regulation issued hereafter shall be liable to suchperson in the amount of P100 or in an amount equal to twice the finance charge required by suchcreditor in connection with such transactions, whichever is the greater, except that such liabilityshall not exceed P2,000 on any credit transaction. Action to recover such penalty may be broughtby such person within one (1) year from the date of occurrence of the violation, in any court of

competent jurisdiction. In any action under this Subsection in which any person is entitled to arecovery, the creditor shall be liable for reasonable attorneys fees and court costs as determinedby the court.

b. Except as specified in Item a above, nothing contained in this rule shall affect the validity orenforceability of any contract or transaction.

c. Any person who willfully violates any provision of this Section or regulation issued hereaftershall be fined by not less than P1,000 nor more than P5,000 or imprisonment for not less than 6months, nor more than one year or both.

d. No punishment or penalty provided by this Section shall apply to the Philippines Government or

any agency or any political subdivision thereof.

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Appendix J

DISCLOSURE STATEMENT OF LOAN/CREDIT TRANSACTION

_____________________________________(Business Name of Creditor)

DISCLOSURE STATEMENT OF LOAN/CREDIT TRANSACTION (SINGLE PAYMENTOR INSTALLMENT PLAN

(As required under R.A. 3765, Truth in Lending Act)

Name of Borrower _____________________________________________________

Address ___________________________________________________________

1. Cash/Purchase Price _______________ or Net Proceeds of Loan P_________

(Item Purchased)

2. LESS: Downpayment and/or Trade-in Value

(Not applicable for loan transaction) __________

3. Unpaid Balance of Cash/Purchase Price or

Net Proceeds of Loan __________

4. Non-Finance Charges (Advanced by Seller/Creditor):a. Insurance Premium P __________________

b. Taxes __________________

c. Registration Fees __________________

d. Documentary/Science Stamps __________________

e. Notarial Fees __________________

f. Others:

_________________ __________________

_________________ __________________

_________________ __________________

Total Non-Finance Charges __________

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5. Amount to be Financed (Items 3 + 4) P_________

6. Finance Charges*

a. Interest __________% p.a.

from ______ to _______ P_______________

[ ] Simple [ ] Monthly

[ ] Compound [ ] Quarterly

[ ] Semi-Annual

[ ] Annual

b. Discounts ________________

c. Service/Handling Charges ________________

d. Collection Charges ________________

e. Credit Investigation Fees ________________

f. Appraisal Fees ________________

g. Attorneys/Legal Fees ________________

h. Other charges incidental to the

extension of credit (specify):

_____________________ _________________

_____________________ _________________

_____________________ _________________

Total Non-Finance Charges P_________

7. Percentage of Finance Charges to Total Amount Finances ________ %

8. Effective Interest Rate ________ %

9. Payment

a. Single Payment due ____________ P_________

(Date)

b. Total Installment Payments P_________

(Payable in ____ weeks/months @ P_______)

* Time price differential should be disclosed as a finance charge. If an itemization cannot be made, a lump-sum figure may be

reported underOther Charges incidental to the extension of credit in Item 6h.

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Appendix J-7

10. Additional charges in case certain stipulations in the contract are not met by the

debtor:

Nature Rate Amount

___________________ ________________ ________________

___________________ ________________ ________________

___________________ ________________ ________________

___________________ ________________ ________________

CERTIFIED CORRECT:

____________________________

(Signature of Creditor/Authorized

Representative Over Printed Name)

____________________________

Position

I ACKNOWLEDGE RECEIPT OF A COPY OF THIS STATEMENT PRIOR TO THE

CONSUMMATION OF THE CREDIT TRANSACTION AND THAT I UNDERSTAND

AND FULLY AGREE TO THE TERMS AND CONDITIONS THEREOF.

____________________________

(Signature of Buyer/Borrower

Over Printed Name)

DATE _________________

NOTICE TO BUYER/BORROWER: YOU ARE ENTITLED TO A COPY

OFTHIS PAPER WHICH YOU SHALL SIGN.

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