It is the policy of the state to protect its citizens 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.
Banks are required to strictly adhere to the provisions of R.A. 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 following regulations shall apply to all banks engaged in the following types of credit transactions:
a. Any loan, mortgage, deed of trust, advance and discount;
b. 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; c. Any rental-purchase contract; d. Any contract or arrangement for the hire, bailment, or leasing of property; e. Any option, demand, lien (right to possess), pledge, or other claim against, or for delivery of, property or money; f. Any purchase, or other acquisition of, or any credit upon security of any obligation or claim arising out of any of the foregoing; and g. Any transaction or series of transactions having a similar purpose or effect.
As a general rule, loan terms shall be disclosed to all types of borrower. For small business/retail/consumer credit, the following are the minimum information to be disclosed:
a. The total amount to be financed;
b. The finance charges expressed in terms of pesos and centavos; c. The net proceeds of the loan; and d. The percentage that the finance charge bears to the total amount to be financed expressed as a simple annual rate or an EIR as described in Item "h" of Definition of terms in this Section. EIR may also be quoted as a monthly rate in parallel with the quotation of the contractual rate.
Each person, to whom credit is extended, prior to the consummation of the transaction, shall be furnished a clear statement in writing setting forth, to the extent applicable and in accordance with rules and regulations prescribed by the Monetary Board, the following information:
• The cash price or delivered price of the property or service to be acquired;
• The amounts, if any, to be credited as down payment and/or trade-in; • The difference between the amounts set forth under clauses (1) and (2); • 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; • The total amount to be financed; • The finance charge expressed in terms of pesos and centavos; and • 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.
Banks are required to furnish each borrower a copy of the disclosure statement, prior to the consummation of the transaction.
The borrower has a right to demand a copy of the disclosure statement.
