Question & AnswerQ&A (Republic Act No. 8367)
The short title of Republic Act No. 8367 is the "Revised Non-Stock Savings and Loan Association Act of 1997."
The main policy objectives are to encourage savings and judicious credit use among members of non-stock savings and loan associations, regulate and supervise their activities to ensure sound and stable operations, lay down minimum requirements for their organization and operation, and protect members from misfeasance and malfeasance of trustees and officers.
It is a non-stock, non-profit corporation engaged in accumulating members' savings and using such funds to provide loans to members for household needs, including long-term financing for home building, development, and personal finance.
At least five (5) but not more than fifteen (15) members of a well-defined group may form the association under this Act. The association must secure a license from the Monetary Board and register with the Securities and Exchange Commission (SEC) prior to transacting business.
A well-defined group may include employees, officers, and directors of one company (including member-retirees); government employees in the same department, branch or office (including member-retirees); and immediate family members up to the second degree of consanguinity or affinity of those persons.
Yes, associations are exempt from income tax on income received including interest on bank deposits. However, income derived from any property or profit-driven activities is subject to internal revenue taxes. Interest earnings on members' deposits and members’ shares from net income are also exempt from income tax.
All deposits are absolutely confidential; no person or government office may inquire or examine deposits without written permission of the depositor, except in cases of impeachment, court orders involving bribery or dereliction of duty, or when deposits are subject matter of litigation.
Loans may not exceed the member's deposits and contributions plus twelve (12) months of regular salary or 70% of the fair market value of any acceptable collateral, with maximum loan terms depending on the type, such as five years for regular loans or up to 25 years for home building loans secured by unencumbered real estate.
Loans to trustees or officers require written approval by the majority of trustees excluding the concerned trustee and shall not exceed 20% of the total capital contributions at any one time. Transactions must not be on terms more favorable than those for other members. Violations lead to forfeiture of office and penalties including imprisonment and fines.
They may be punished under Republic Act No. 1405 and other applicable penalties including fines up to 10,000 pesos or three times the loan amount, and imprisonment of up to one year, at the discretion of the court.
The Monetary Board regulates capital, financing, administration, integrity of organizers and officers, imposes limits on loans and investments, requires bond posting, conducts examinations, issues regulations, and may revoke or suspend licenses for violations or solvency issues.
No, they are prohibited from advertising or representing themselves as banks or implying they conduct business that is legally prohibited to associations.
Every association must create a withdrawable share reserve consisting of 2% of total capital contributions, which the Monetary Board may increase to a maximum of 3%, and may not distribute net income if reserves fall below this minimum.
Associations cannot invest more than 10% of total assets in bonds and securities without prior approval, 5% of total assets in real property, and more than 10% of capital contributions in office furniture, fixtures, equipment, and leasehold improvements.
A written note or other obligation expressing the rate of interest must be executed by the borrower for each loan.