Updated Rules on Truth in Lending Act

Finance Charge encompasses interest, fees, service charges, discounts, and other charges related to credit extension.
Simple Annual Rate is defined as the ratio of finance charge to the amount financed, assuming repayment in a single payment after one year, with no upfront principal deductions.
Effective Annual Interest Rate (EIR) must be calculated and disclosed for loans not conforming to the simple annual rate assumptions.
EIR represents the true cost of the loan, discounting estimated future cash flows to the net loan proceeds, consistent with Philippine Accounting Standards.
Methodology and standards for discounted cash flow models for EIR calculation will be prescribed.

Banks must disclose loan terms to all borrowers.
For small business, retail, and consumer credits, the minimum disclosure requirements include:
- Total amount to be financed.
- Finance charges expressed in pesos and centavos.
- Net loan proceeds.
- Finance charge percentage relative to the financed amount, expressed as simple annual rate or EIR.
- EIR may be additionally quoted as a monthly rate alongside contractual rates.
Borrowers must be furnished with a copy of the disclosure statement prior to loan consummation.

Banks must display the revised disclosure statement format prominently in main offices and branches.
Posters must include a clear notice that the disclosure statement is mandatory with the loan contract and that customers have the right to receive a copy.
Additional enhancements and guidelines for posters will be issued via a memorandum to all banks.

Appendix 19 of the Manual of Regulations for Banks is revised to align with current industry practices, focusing on small business, retail, and consumer loans.
The revision remains consistent with the Truth in Lending Act (R.A. No. 3765).
The amended rules took effect on 1 July 2012 as per the Monetary Board resolution.