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The Law: RA 3765

An act to require the DISCLOSURE


OF FINANCE CHARGES in
connection with EXTENSIONS OF
CREDIT (Sec.1)
Approved on June 22, 1963 (Sec.7)
TiLA Sections in One Word
Section 1 -> Title

Section 2 -> Policy

Section 3 -> Definitions

Section 4 -> Information Section 5 -> Board

Section 6 -> Penalties

Section 7 -> Effectivity


Policy behind the Law

Protect the people 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. (Sec.2)
Purpose

INFORM + PROTECT!
Who are covered under the
Truth in Lending Act?
The law covers any creditor
who requires as an incident
to the extension of credit,
the payment of a finance
charge.
Definition: Creditor
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)
Definition: Credit
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;
Definition: Credit
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, or other acquisition of, or any
credit upon the security of, any obligation
of claim arising out of any of the foregoing;
Definition: Credit

any transaction or series of


transactions having a similar
purpose or effect.
Definition: Finance Charge
A finance charge includes interest,
fees, service charges, discounts, and
such other charges incident to the
extension of credit as may be
prescribed by the Monetary Board of
the Bangko Sentral ng Pilipinas
through regulations.
Obligation of the Creditor

a clear statement in writing FDS


furnished to each person to whom
credit is extended, prior to the
consummation of the transaction
What should be disclosed
cash price or delivered price;
amount of down payment and/or trade-in,
if any;
the difference between the amounts;
individually itemized charges;
total amount to be financed;
What should be disclosed
finance charge in pesos and centavos;

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. *
THE MONETARY
BOARD
Exercises the powers and functions
of BANGKO SENTRAL NG
PILIPINAS
has seven members appointed by
the President of the Philippines.
Issuances
BSP NON-BSP
BSP Circular No. 730 (20 July SEC Memorandum Circular
2011); effective 01 July 2012-
for CGEs 07 (September 2011)

BSP Circular Nos. 754 (17 IC Circular Letter No. 31-


April 2012) and 755 (20 April 2011 (5 October 2011)
2012)

BSP Memorandum Nos. CDA Memo Circular No.


M2011-040 (28 July 2011), 2012-05 (14 March 2012)
M2012-018 (19 April 2012),
M2012-020 (25 April 2012)
and M2012-030 (03 July 2012)
Basic Features
Interest charged on outstanding balance at the
start of each interest period

Disclosure of all charges incident to the loan

Effective Interest Rate (EIR) in all loan


documents
Civil Penalty
Any creditor who violates the law is liable 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.
The action must be brought within one year from
the date of the occurrence of the violation. (Sec.
6(a))
Criminal Liability

Any person who willfully violates any


provision of this law or any
regulation issued thereunder shall
be fined by not less than P1,000 or
more than P5,000 or imprisonment
of not less than 6 months, nor more
than one year or both.
Other Liabilities
The creditor is also liable for reasonable
attorneys fees and court costs as determined
by the court (Sec.6(a))

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 (Se. 6(e))
Penalty shall not apply to
the Government
Penalty shall not apply to the
Philippine Government or any
agency or any political
subdivision thereof (Sec. 6(d))
Effect on the Contract
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. (Sec.6(b))
In effect

The contract or transaction


remains valid or enforceable,
subject to the penalties
UCPB v. Sps. Beloso
(2007)
FACTS: UCPB granted the spouses BELUSO a
PN Line under a Credit Agreement. The PNs,
however, did not contain the interest rate to be
imposed on the credit but instead gave UCPB
the power to choose what interest rates to apply
ranging from 18-34%.
UCPB v. Sps. Beloso
(2007)
ISSUE: WoN UCPB is liable for violation of
the Truth in Lending Act?
HELD: YES. SC held this is a violation of
the Truth Lending Act which mandates
any creditor to disclose the true finance
charges to its debtors.
UCPB v. Sps. Beloso
(2007)
UCPB SC

The imposition of penalty The allegations of the


complaint are controlling. The
for violation of the Truth allegation of violation of the
Lending Act mandates Truth in Lending Act can be
the filing of an action to inferred from the allegation of
that the promissory notes
recover such penalty grant UCPB the power to
pursuant to Sec 6(a). unilaterally fix the interest
rates certainly means that the
PNs do not contain a clear
statement in writing
UCPB v. Sps. Beloso
(2007)
UCPB SC

A violation of the TLA, Sections 6(a) and (c) of the


TLA give rise to both criminal
being a criminal offense and civil liabilities.
cannot be inferred nor
In this case, the civil action to
implied from the recover penalty under Sec
allegations in the 6(a) had been jointly
instituted with the (1) action
complaint. to declare the interests in the
PNs void and (2) the action to
declare the foreclosure the
foreclosure void.
UCPB v. Sps. Beloso
(2007)
UCPB SC

Since the SPS Beluso Sec. 4 of the TLA


were duly given copies clearly provides that
of the subject PNs after
their execution, then they
the disclosure
were duly notified of the statement must be
terms thereof, in furnished prior to the
substantial compliance consummation of the
with the TLA. transaction.