FM 11-6 WEEK 2 BALMADRES, CYNARA JOYCE T.

EVALUATION (OUTCOME):

1. Discuss the credit system of the Philippines

a) The Philippine Credit System
I. Credit – ability to obtain a thing of value in exchange for a promise
to pay define sum of money on demand or future determinable
time
II. Foundations of Credit
i. Confidence – creditor must trust the debtor’s personal
character as a measure of his capacity to pay
ii. Proper Facilities – to make an agreement valid
iii. Stability of Monetary Standard – the more stable value of
money, the greater is the possibility for approving credit
iv. Government Assistance – regulations protecting both
parties are highly considered for credit transactions
v. Credit Risk – the possibility that the debtor may not fulfill
his promise payment
III. Classifications of Credit
i. Type of User – consumer credit, commercial credit
ii. Maturity – short term, long term
iii. Purpose – investment credit, agricultural credit, export
credit, real estate, industrial credit
IV. Maturity
i. Short Term
ii. Long Term
V. Form of Credit
i. Cash Form
ii. Merchandise Form
VI. Credit Instruments
i. Premises to pay a definite or determinable sum of money to
bearer or order, on demand or at a future specified time
ii. This document gives evidence to a credit obligation
resulting from the past transactions which sets forth the
responsibility of the debtor to his creditor
b) There’s still no centralized credit reporting in the Philippines like there is
in the US, where 300 is a bad credit score and 850 is the best. Because of
this, “most big banks either rely on an internal database (record of past
and existing clients’ handling of both lending and deposit accounts) or
external sources,” says Alex Ilagan, executive director and spokesperson
of the Credit Card Association of the Philippines (CCAP), in an email
interview with iMoney Philippines. The most common external sources
are the Bankers Association of the Philippines Credit Bureau or the CCAP
C4 (Consolidated Cancelled Credit Cards) negative file.
 c) Back in September 2013, the Inquirer reported that the Credit
Information Corporation (CIC), a centralized national credit bureau, was
expected to start operating in December 2014. Jaime Garchitorena,
president and CEO of CIC, said in an interview with ANC’s On the Money
that the bureau should be up and running by the end of 2015/early 2016.

d) Until then, there’s TransUnion, one of largest credit reporting agencies,

which has been operating in the Philippines since 2011. They’re
partnered with BPI, Banco de Oro, Metrobank, HSBC, and Citibank. The
partnership created a centralized credit-information system that collects
credit data. However, according to Ilagan, “the cost is very prohibitive and
access is limited to member banks only,” meaning that banks that have
not partnered with TransUnion don’t have access to the reports
they provide.

2. Explain the importance and purposes of interview in credit and collection.

a) The purpose of an interview is twofold: It shows the creditor what you
can do in the money they will lend you, and it gives you an opportunity to
assess whether your qualifications and career ambitions align with the
debt.

3. What are the characteristics of a good credit manager?

a) A good negotiator. Lenders and credit managers often have to take an
array of pieces of information to craft a decision that will benefit the
company rather than expose it to unnecessary risk. Being people-oriented
and having a true interest in working with people can allow you to
balance risk with opportunity.
b) An independent thinker. It’s important to be able to base decisions on
facts rather than attitudes of others toward a particular customer.
c) Knowledgeable of laws that affect credit in your area. Understanding
federal, state and local laws that are relevant to your field may help the
creditor avoid certain acts that could create liability.
d) Has integrity. Trust in banks and financial institutions have improved, but
it remains low, so maintaining a solid reputation is important.
e) Is analytical. Very often, the figures on financial statements don’t tell the
whole story. It’s critical to understand and study the data behind the
figures and to search for trends and clues to the future.

4. Discuss the truth in lending Act. Republic Act No. 3765

a) The Truth in Lending Act (TILA) protects you against inaccurate and
unfair credit billing and credit card practices. It requires lenders to
provide you with loan cost information so that you can comparison shop
for certain types of loans.

b) The Republic Act No. 3765 provides detailed information of this policy:
c) Section 4. 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 bears to the total amount to be financed
expressed as a simple annual rate on the outstanding unpaid balance of
the obligation.

d) Section 5. The Board shall prescribe such rules and regulations as may be
necessary or proper in carrying out the provisions of this Act. Any rule or
regulation prescribed hereunder may contain such classifications and
differentiations as in the judgment of the Board are necessary or proper
to effectuate the purposes of this Act or to prevent circumvention or
evasion, or to facilitate the enforcement of this Act, or any rule or
regulation issued thereunder.

e) Section 6. (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 in the
amount of P100 or in an amount equal to twice the finance charged
required by such creditor in connection with such transaction, whichever
is the greater, except that such liability shall not exceed P2,000 on any
credit transaction. 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. 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.
(b) Except as specified in subsection (a) of this section, 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.
(c) Any person who willfully violates any provision of this Act or any
regulation issued thereunder shall be fined by not less than P1,00 or
more than P5,000 or imprisonment for not less than 6 months, nor more
than one year or both.
(d) No punishment or penalty provided by this Act shall apply to the
Philippine Government or any agency or any political subdivision thereof.
(e) 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.