Truth in Lending Act – R.A. No.

3765 What are the effects if the creditor fails to

disclose?
was called as the “growling financial
watchdog of hapless borrowers” in one of the The credit transaction remains valid and
Supreme Court cases. enforceable, but the debtor is afforded the following
​ To protect the public from lack of remedies:
awareness of the true cost of credit by requiring ●​ File a civil case for recovery of damages in
from the creditor the disclosure of full information the amount of Php 100 or of twice the
incident to a credit transaction. finance charge required by the creditor,
whichever is greater, but not to exceed
Article 1956 of the Civil Code P2,000.
-​ No interest shall be due unless it is in ●​ Must be brought within one year from the
writing. date of the occurrence of the violation, in
any court of competent jurisdiction
●​ If non-disclosure is willful, file a criminal
Disclosure Requirement
case. Penalty is fine not less than P1,000 or
Creditors are required to furnish to each more than P5,000 or imprisonment for not
person to whom credit is extended, prior to the less than 6 months, nor more than one year
consummation of the transaction, a clear statement or both.
in writing setting forth, to the extent applicable and ●​ The lender will have no right to collect such
in accordance with rules and regulations prescribed charge or increases thereof, even if
by the Board, the following information: stipulated in the promissory note
(1)​ the cash price or delivered price of the (Development Bank of the Philippines vs
property or service to be acquired; Arcilla, 462 SCRA 599).
(2)​ the amounts, if any, to be credited as down
payment and or trade-in;
Examples of Violations of Truth in Lending Act
(3)​ the difference between the amounts set
forth under clauses (1) and (2) ●​ Requiring debtors to sign credit documents
(4)​ the charges, individually itemized, which are and promissory notes in blank, and then
paid or to be paid by such person in unilaterally filling them up later on (Spouses
connection with the transaction but which Silon vs. PNB).
are not incident to the extension of credit; ●​ A promissory note which grants the creditor
(5)​ the total amount to be financed; the power to unilaterally fix the interest
(6)​ the finance charge (collection fees, attorney rate means that the promissory note does
fees) expressed in terms of pesos and not contain a clear statement in writing of
centavos; and the finance charge (UCPB vs. Veloso).
(7)​ the percentage that the finance bears to the
total amount to be financed expressed as a Problem: Jungkook went to Dynamite Bank and
simple annual rate on the outstanding applied for a loan. The bank manager made him
unpaid balance of the obligation. simultaneously sign credit documents and a
promissory note. On the disclosure statement
included in the credit documents, there was no
Who are the lenders required to disclose?
mention of penalty charges, but on the promissory
●​ Banks and other financial institutions; note the penalty charges were detailed.
●​ Any person in the business of extending On the first month that the loan was due,
loans, or selling or renting property or Jungkook failed to pay on time. Dynamite Bank sent
services on a time, credit, or installment him a statement of account for the total amount
basis, either as principal or as agent. due, which includes interest and penalty charges.
Jungkook contests the penalty charges and avers
that he is not liable there to since it wasn’t included
on the disclosure statement. Is Jungkook correct?
Answer: No. The reference to the penalty charges in 6.​ Prosecution for unexplained wealth under
the promissory note constitutes substantial the Anti-Graft and Corrupt Practices Act.
compliance with the disclosure requirement of the 7.​ Prosecution for unexplained wealth under
Truth and Lending Act (BPI vs Spouses YU). the Anti-Graft and Corrupt Practices Act.
PDIC/BSP may inquire into bank deposits if
there is a finding of unsound or unsafe
Bank Secrecy Law R.A. No. 1405 and 6426
banking practice. (Sec. 8[8], PDIC Charter).
R.A. No. 1405 only covers local currency 8.​ Power of the Ombudsman (needs to have a
deposits. pending case) to examine and have access to
bank accounts and records under Sec. 15(8)
Why is there a Bank Secrecy Law in the first of RA 6770.
place? 9.​ Authority of the Commissioner of Internal
Revenue to inquire into the bank deposits of
The law was enacted to encourage people to
a decedent for estate tax purposes or in
deposit their money in banking institutions and to
case of a tax compromise under Sec. 6(f) of
discourage private hoarding so that the same may
the NIRC or upon request for tax
be properly utilized by banks in authorized loans to
information by a foreign tax authority under
assist in the economic development of the country.
an international convention or agreement.
(See RA 10021 [2009]).
Coverage:
10.​ Authority of the AMLC to inquire into any
All deposits of whatever nature with banks
particular deposit or investment with any
or banking institutions in the Philippines including
banking institution upon order of CA based
investments in bonds issued by the Government of
on an ex parte application upon probable
the Philippines, its political subdivisions and its
cause that such deposit/investment is
instrumentalities, are hereby considered as of an
related to an unlawful activity or to money
absolutely confidential nature and may not be
laundering pursuant to Section 11 of the
examined, inquired or looked into by any person,
Anti-Money Laundering Act of 2001 (R.A.
government official, bureau or office.
9160, as amended by R.A. 9194 and R.A.
10167).
Prohibited Act:
a.​ Reporting of covered or suspicious
​ It shall be unlawful for any official or
transactions pursuant to S9(c) of the
employee of a banking institution to disclose to any
AMLA.
person any information concerning bank deposits.
b.​ The BSP may, in the course of a
​ The prohibition is not absolute. The rule
periodic or special examination,
allows several exceptions, carved out by special
check the compliance of a covered
laws and jurisprudence (cases that are resolved by
institution with the requirements of
the Supreme Court).
the AMLA and its implementing
rules and regulations. (S11 AMLA).
Exceptions: (PIO-GUAPO-CA–A)
11.​ Authority of AMLC, either upon its own
1.​ Written permission of the depositor.
initiative or at the request of ATC, to inquire
2.​ Impeachment
into bank deposits upon the issuance by the
3.​ Upon order of a competent court:
court of a preliminary order of proscription
a.​ In cases of bribery or dereliction
or in case of designation:
(failure to fulfill one's obligations) of
a.​ Any property or funds that are in
duty of public officials.
any way related to financing of
b.​ The money deposited or invested is
terrorism as defined and penalized
the subject matter of litigation (the
under RA 10168 .
process of taking legal action).
b.​ Violation of Sections 4,6,7,10,11 or 12
4.​ Incidental disclosure in garnishment or
of the Anti-Terrorism Law .
execution of bank deposits.
c.​ Property or funds of any person or
5.​ Incidental disclosure under the Unclaimed
persons in relation to whom there is
Balances Law.
probable cause to believe that such
 person or persons are committing or
Exception from process of Foreign Currency
attempting or conspiring to commit,
Deposits
or participating in or facilitating the
financing of terrorism. ​ Foreign currency deposits (FCD) shall be
exempt from attachment, garnishment, or any
other order or process of any court, legislative
Confidentiality of Foreign Currency Deposits
body, government agency or any administrative
R.A. No. 6426
body whatsoever. (§8 FCDA). The
​ All foreign currency deposits are of an process-exemption should be distinguished from
absolutely confidential nature and, except upon the confidentiality clause. Exemption from
the written permission of the depositor, in no confidentiality does not necessarily translate to
instance shall foreign currency deposits be exemption from process.
examined, inquired or looked into by any person, ​ In other words, FCD are exempt from court
government official, bureau or office whether order or administrative process.
judicial or administrative or legislative, or any other
entity whether public or private. Problem: For example, you lent P500,000 to Win, a
Thai national residing and working in the
Exceptions to Confidentiality of FCD: (WAP-AC) Philippines. When the loan fell due, Win didn’t pay.
1.​ Written permission of depositor. You found out that Win has a peso account deposit
2.​ Authority of the AMLC to inquire into any with Chinaoil Bank and a foreign currency deposit
particular deposit or investment with any with NorthSouth Bank. Despite demands, Win
banking institution upon order of CA based refuses to pay because he said that the remaining
on an ex parte application upon probable money he has is already allocated for his vacation in
cause that such deposit/investment is Bali with his boyfriend, Bright. You now went to
related to an unlawful activity or to money court, filed a case against Win for collection of sum
laundering pursuant to Section 11 of the of money and won. In order to satisfy your claim
Anti-Money Laundering Act. against Win, you applied for a writ of garnishment
a.​ Reporting of covered or suspicious with the court for the bank deposits of Win. Will the
transactions pursuant to S9(c) of the court issue the writ?
AMLA.
b.​ The BSP may, in the course of a Answer: Yes for the peso deposit account but no
periodic or special examination, for foreign currency deposits because they are
check the compliance of a covered exempt from garnishment.
institution with the requirements of
the AMLA and its implementing
rules and regulations. (S11 AMLA).
3.​ PDIC/BSP may inquire into bank deposits if
there is a finding of unsound or unsafe
banking practice. (Sec. 8[8] PDIC Charter).
4.​ Authority of AMLC to inquire into or
examine bank deposits & investments
pursuant to the Anti-Terror Law.
5.​ Authority of the Commissioner of Internal
Revenue to inquire into the bank deposits of
a decedent for estate tax purposes or in
case of a tax compromise.