Legal basis and referenced compliance rules
- BSP Memorandum No. M-2008-020 enjoins strict compliance with Republic Act No. 3765 for banks and financial institutions under BSP supervision.
- The Memorandum ties compliance duties to Sec. X307 of the Manual of Regulations for Banks (MORB).
- The Memorandum ties compliance duties to Sections 4309Q, 4101N, and 4307S of the Manual of Regulations for Non-Bank Financial Institutions (MORNBFI).
- The Memorandum specifically highlights requirements on disclosure of credit information, contract content, and conspicuous posting.
Policy and purpose of the memorandum
- BSP Memorandum No. M-2008-020 requires strict compliance with Republic Act No. 3765 by all covered entities.
- The Memorandum directs creditors to provide clear, written pre-transaction disclosure and to document required items in loan contracts or related documents.
- The Memorandum requires public posting of required disclosures so borrowers can readily see applicable information.
Credit disclosure required before transaction
- Republic Act No. 3765 requires that any creditor furnish to each person to whom credit is extended a clear written statement prior to the consummation of the transaction.
- The statement must be furnished to the extent applicable and in accordance with rules and regulations prescribed by the Monetary Board.
- The statement must disclose the following seven (7) items when applicable:
- (1) the cash price or delivered price of the property or service to be acquired;
- (2) the down payment and/or trade-in amounts, if any, to be credited;
- (3) the difference between the cash/delivered price and the amounts under item (2);
- (4) the charges, individually itemized, that are paid or to be paid by the borrower in connection with the transaction but are not incident to the extension of credit;
- (5) the total amount to be financed;
- (6) the finance charge expressed in pesos and centavos; and
- (7) 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.
Contract and document content requirements
- Republic Act No. 3765 requires that the contract covering the transaction or any other document to be acknowledged and signed by the debtor indicate the seven (7) required items of information.
- The contract or signed document must also specify additional charges, if any, that will be collected in case certain stipulations in the contract are not met by the debtor.
Conspicuous posting of disclosures
- Republic Act No. 3765 requires the covered entities to post in conspicuous places in their principal place of business and branches:
- an abstract of the provisions of Republic Act No. 3765 in the form prescribed by the Monetary Board; and
- information regarding interest and other charges on loans.
- The posted abstract must be reproduced in a format of sixty (60) cm wide and seventy-five (75) cm long (Annex "A").
- The required loan interest/charges information must include:
- (1) type of loan;
- (2) simple annual rate of interest;
- (3) manner of interest payment (whether collected in advance or otherwise); and
- (4) other fees and charges imposed by the bank in connection with the loan.
Civil liability for non-disclosure
- Section 6 of Republic Act No. 3765 makes a creditor liable if, in connection with any credit transaction, the creditor fails to disclose required information in violation of the Act or any regulation issued thereunder.
- Liability is imposed on the creditor in favor of the affected person in the amount of:
- PHP 100, or an amount equal to twice the finance charged required by such creditor in connection with the transaction—whichever is greater.
- The liability is subject to a cap: it shall not exceed PHP 2,000 on any credit transaction.
- BSP Memorandum No. M-2008-020 enjoins strict compliance with these requirements so that creditors avoid exposure to the liabilities under Section 6.
Implementation and compliance directive
- BSP Memorandum No. M-2008-020 enjoins all banks and financial institutions under BSP supervision to strictly comply with Republic Act No. 3765.
- The Memorandum directs compliance for requirements covering pre-transaction written disclosure, contract/document inclusion of required disclosures, and conspicuous posting of mandated information.
- The Memorandum emphasizes that compliance follows the relevant MORB and MORNBFI provisions, including the cited sections that implement or reference Republic Act No. 3765 obligations.