Truth in Lending Act

R.A. 3765
• Purpose
- Protect debtor from effects of
misrepresentation or concealment.
- Permit the debtor to fully appreciate and
evaluate the real cost of his borrowings.

• Applicability
– Credit?, Finance Charge?
– No punishment or penalty provided by RA
3765 shall apply to the Philippine
Government or any agency or any political
subdivision thereof.
 Disclosure Requirement
• Who? To whom?
• What?
(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.
Effects of Non-disclosure
• Non-compliance would authorize the debtor to
recover any interest payment made.
• CIVIL- Liable in the amount of P100 or in an
amount equal to twice the finance charged in
connection with such transaction, whichever is
the greater, except that such liability shall not
exceed P2,000 on any credit transaction.
• CRIMINAL- Fine of not less than P1,000 or more
than P5,000 or imprisonment for not less than 6
months, nor more than one year or both.
• Prescriptive Period - one (1) year
• DBP v. Arcilla, Jr. (G.R. No. 161397, June 30, 2005)
• Contrary to appellee’s claim that he was not
sufficiently informed of the details of the loan, the
records disclose that the required informations
were readily available in the three (3) promissory
notes he executed. Precisely, the said promissory
notes were executed to apprise appellee of the
remaining balance on his loan when the same was
converted into a regular housing loan. And on its
face, the promissory notes signed by no less than
the appellee readily shows all the data required
by the Truth in Lending Act (R.A. No. 3765).
• Consolidated v. CA (246 SCRA 195)
• Section 7 of the same Circular, however, provides
that all banks and non-bank financial intermediaries
authorized to engage in quasi-banking functions are
required to strictly adhere to the provisions of
Republic Act No. 3765 otherwise known as the
"Truth in Lending Act" and shall make the true and
effective cost of borrowing an integral part of every
loan contract. The promissory notes signed by
private respondents do not contain any stipulation
on the payment of handling charges. Petitioner
bank cannot, therefore, charge private respondents
such handling charges.
• New Sampaguita Builders Construction, Inc. v. PNB (435 SCRA
565)
• No penalty charges or increases thereof appear either in the
Disclosure Statements or in any of the clauses in the second and
the third Credit Agreements earlier discussed. While a standard
penalty charge of 6 percent per annum has been imposed on the
amounts stated in all three Promissory Notes still remaining
unpaid or unrenewed when they fell due, there is no stipulation
therein that would justify any increase in that charges. The
effect, therefore, when the borrower is not clearly informed of
the Disclosure Statements -- prior to the consummation of the
availment or drawdown -- is that the lender will have no right
to collect upon such charge or increases thereof, even if
stipulated in the Notes. The time is now ripe to give teeth to
the often ignored forty-one-year old “Truth in Lending Act” and
thus transform it from a snivelling paper tiger to a growling
financial watchdog of hapless borrowers.