QuestionsQuestions (CDA MEMORANDUM CIRCULAR NO. 2012-05)
The circular cites BOA Res. No. 074, series of 2012 dated March 14, 2012, and Republic Act No. 3765 (Truth in Lending Act).
All credit and multi-purpose cooperatives with savings and loan services registered with the Cooperative Development Authority under RA 9520.
To enhance loan protection transparency; ensure a level playing field among credit providers; protect member-borrowers from misrepresentation and concealment; allow full appreciation of the real cost of borrowings; and avoid circumvention of usury laws.
Interest shall be charged only based on the outstanding balance of the loan at the beginning of an interest period.
Interest per installment period is computed based on the outstanding balance at the beginning of each installment period.
So that the disclosed repayment schedule matches the required method of computing interest—based on the outstanding balance at the beginning of each interest/installment period.
“Finance charges” include interest, fees, service fees, discounts, and other charges incidental to the extension of credit.
It uses the definition in the Standard Chart of Accounts (SCA) MC-2009-4 Series of 2009: financial assets with fixed or determinable payments not quoted in an active market other than certain categories (e.g., Available for Sale, Held to Maturity, or Investment at Fair Value through Profit and Loss).
No. As a general rule, loan terms shall be disclosed to all types of borrowers.
The total amount of loans; the finance charges; the net proceeds of the loans; and the percentage that the finance charge bears to the total amount of the loans.
It enjoins them to adopt the stated disclosure rules.
Upon approval of the Board of Administrators and fifteen (15) days after submission of a copy to the Office of the National Administrative Register (ONAR).
It is a condition for effectivity: the circular takes effect fifteen days after submission to the ONAR following Board approval.
By requiring interest to be based only on the outstanding balance at the beginning of each interest/installment period, it standardizes and clarifies how interest is determined and reflected in loan documents.
Borrowers in micro and small cooperative lending operations should be informed of the net proceeds of the loans as part of the minimum disclosure requirements.
The finance charge and specifically the percentage that the finance charge bears to the total amount of the loans.
The repayment schedules and loan-related documents would be inconsistent with the mandated computation method, violating the requirement that documents show repayment schedules consistent with Section 4.
Uniform rules on computing interest on outstanding balances and standardized minimum disclosures of loan costs and net proceeds.