Scope and who must comply
- These rules apply to all credit and multi-purpose cooperatives with savings and loan services.
- Covered cooperatives must be registered with the Cooperative Development Authority under Republic Act No. 9520.
- Covered cooperatives are required to apply the disclosure rules and related loan computations under these guidelines.
Purpose and policy objectives
- The rules are issued to enhance loan protection transparency.
- The rules are issued to ensure a level playing field among credit providers.
- The rules are issued to protect the member-borrower from the effect of misrepresentation and concealment.
- The rules are issued to permit the member-borrower to fully appreciate and evaluate the real cost of borrowings.
- The rules are issued to avoid circumvention of usury laws.
Computing interest on loan receivables
- Interest must be charged only based on the outstanding balance of the loan at the beginning of an interest period.
- For loans where the principal is payable in installments, interest per installment period must be calculated based on the outstanding balance at the beginning of each installment period.
- All loan-related documents must show repayment schedules in a manner consistent with these interest-computation rules.
Definitions that control
- Finance Charges includes interest, fees, service fees, discounts, and other charges incidental to the extension of credits.
- Loans and Receivables refer to financial assets with fixed or determinable payments that are not quoted in an active market, other than assets classified as Available for Sale, Held to Maturity, and Investment at Fair Value through Profit and Loss under the Standard Chart of Accounts (SCA) MC-2009-4 Series of 2009.
Required loan disclosures
- The general rule requires that loan terms be disclosed to all types of borrowers.
- For micro and small cooperatives with lending operations, the minimum disclosed information is:
- 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.
- All credit cooperatives and multi-purpose cooperatives with savings and lending operations are enjoined to adopt these disclosure rules.
Board approval and administrative processing
- The circular’s effectiveness depends on approval of the Board of Administrators.
- A copy must be submitted to the ONAR, and effectiveness attaches after fifteen (15) days from that submission.