Question & AnswerQ&A (Republic Act No. 3765)
The official short title of Republic Act No. 3765 is the "Truth in Lending Act."
The State declares it is its policy to protect citizens from lack of awareness of the true cost of credit by assuring full disclosure of such cost, to prevent uninformed use of credit to the detriment of the national economy.
Credit means any loan, mortgage, deed of trust, advance, or discount; any conditional sales contract; any contract to sell or sale of property or services payable after the making of such sale or contract; rental-purchase contract; hire, bailment, or leasing arrangement; any lien, pledge, or other claim against property or money; and similar transactions having the effect of credit extension.
Finance charge includes interest, fees, service charges, discounts, and other charges related to the extension of credit as prescribed by the Monetary Board regulations.
A creditor is any person engaged in the business of extending credit, either as principal or agent, who requires payment of a finance charge as an incident to the extension of credit.
The creditor must disclose: (1) the cash or delivered price of the property/service; (2) amounts credited as down payment or trade-in; (3) the difference between these amounts; (4) itemized charges not incident to the extension of credit; (5) total amount to be financed; (6) finance charge expressed in pesos and centavos; and (7) the finance charge as a percentage expressed as a simple annual rate on the unpaid balance.
The Monetary Board of the Central Bank prescribes rules and regulations necessary to implement the Act, including classifications to prevent evasion and facilitate enforcement.
Creditors who fail to disclose required information are liable to the person affected in an amount of P100 or twice the finance charge, whichever is greater, but not exceeding P2,000. They are also liable for reasonable attorney's fees and court costs.
Anyone who willfully violates the Act or regulations is subject to a fine from P1,000 to P5,000, imprisonment from 6 months to one year, or both.
Except for remedies provided for non-disclosure violations, the Act does not affect the validity or enforceability of any contract or transaction.