Category Archives: Banking

No One can be Imprisoned for Non-Payment of Debt

Perhaps you’ve heard someone making threats to file criminal cases against debtors who fail to pay. Yet you’ve heard the statement that no one can be imprisoned simply because of a debt. This is a basic principle and we thought we already have a discussion on this topic. We indeed have such discussion but we forgot to post it here. So here goes. Continue reading

Liability of a Co-Maker: Distinguished from Guarantor

Maybe you’ve been asked by a friend to sign as a co-maker in a loan. You’re then asked to sign a promissory note or a debt instrument which designates you as a co-maker. There should be no problem with this, as the principal is usually someone we know and trust. I’ve seen, however, co-makers being held liable because the principal debtor was not able to pay. We also have a number of queries related to this issue. So let’s have a brief discussion on the extent of a co-maker’s liability. Continue reading

Primer on the Personal Equity and Retirement Account (PERA) Act

What is PERA?

PERA stands for  “Personal Equity and Retirement Account ,” which refers to the voluntary retirement account established by and for the exclusive use and benefit of the Contributor for the purpose of being invested solely in PERA investment products in the Philippines. The Contributor shall retain the ownership, whether legal or beneficial, of funds placed therein, including all earnings of such funds. He makes all investment decisions pertaining to his PERA, with an option to appoint an Investment Manager. Continue reading

Primer on the Credit Information System Act (RA 9510)

What is the policy behind the “Credit Information System Act”? This law, Republic Act No. 9510, is consistent with the need to establish a comprehensive and centralized credit information system for the collection and dissemination of fair and accurate information relevant to, or arising from, credit and credit-related activities of all entities participating in the financial system. A credit information system will directly address the need for reliable credit information concerning the credit standing and track record of borrowers. An efficient credit information system will also enable financial institutions to reduce their over-all credit risk, contributing to a healthier and more stable financial system. Continue reading

The Truth in Lending Act explained

What is the “Truth in Lending Act”?

It is Republic Act No. 3765, which is an act requiring the disclosure of finance charges in connection with the extension of credit.

What is the policy behind the Truth in Lending Act?

The declared policy behind the law is to protect the people from lack of awareness of the true cost of credit by assuring full disclosure of such cost, with a view of preventing the uninformed use of credit to the detriment of the national economy.

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Criminal Cases and Insolvency

I often come across debtors dropping the hint of filing, or actually filing, a case for insolvency or bankruptcy just to bring home the (alleged) point that they have nothing more to cough out. It is true that once a petition for insolvency is granted, the debtor-insolvent is discharged from all his existing debts. The decision to file for insolvency, however, should not be taken lightly. Here are a few reasons why:

The alleged insolvent debtor may be subject to criminal prosecution. There are a number of criminal cases that an alleged insolvent debtor may face. For instance, the debtor may be charged with fraudulent insolvency, a criminal offense, if it is shown that he transferred his property to another place beyond the reach of the creditors. Article 314 of the Revised Penal Code (RPC) reads: Continue reading

Credit cards and unfair collection practices

There are a number of good reasons in favor of having and using a credit card. Still, we all know the possible adverse results in the unchecked use of “plastics” or credit cards, such as this one:

THERE’S a credit-card horror story that’s become some sort of an urban legend: A television personality, after losing his job in a top network, resorts to using his plastic money. By the time he finds employment in the rival network, he has wracked up P58,000 in credit card bills. But he figures he’s not yet ready to pay in full, so he pays just the minimum amount due. Yet after five years, he is shocked to realize that his credit card debt had ballooned more than 10 times to P700,000.

Perhaps you’ve heard, or, most probably, experienced certain “innovative” strategies used by credit card companies and their collection agencies in “persuading” you to pay (they are, of course, entitled to payment). With the rising complaints against these strategies, the Bangko Sentral ng Pilipinas (BSP) issued a set of rules and regulations governing the credit card operations of banks and affiliate credit card companies. Continue reading

Consumer protection in electronic banking (e-banking), e-commerce

The Bangko Sentral ng Pilipinas (BSP) recently issued Circular No. 542, providing for consumer protection for electronic banking. The salient features of Circular No. 542 are:

1. With the growth of e-banking and e-commerce, banks should use reliable methods of originating new customer accounts, ensuring strict adherence to the usual “KYC” or “know your clients” requirements.

2. The Circular spells out the minimum security measures that a bank should employ in its automated teller machine (ATM) facilities and internet or mobile banking activities to protect depositors and consumers from fraud, robbery and other e-banking crimes.

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