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.

Who are covered under the Truth in Lending Act?

The law covers any creditor, which is defined as any person engaged in the business of extending credit (including any person who as a regular business practice make loans or sells or rents property or services on a time, credit, or installment basis, either as principal or as agent) who requires as an incident to the extension of credit, the payment of a finance charge.

In that definition, what is meant by “credit”?

It means any loan, mortgage, deed of trust, advance, or discount; any conditional sales contract; any contract to sell, or sale or contract of sale of property or services, either for present or future delivery, under which part or all of the price is payable subsequent to the making of such sale or contract; any rental-purchase contract; any contract or arrangement for the hire, bailment, or leasing of property; any option, demand, lien, pledge, or other claim against, or for the delivery of, property or money; any purchase, or other acquisition of, or any credit upon the security of, any obligation of claim arising out of any of the foregoing; and any transaction or series of transactions having a similar purpose or effect.

In the same definition, what is meant by a “finance charge”?

A finance charge includes interest, fees, service charges, discounts, and such other charges incident to the extension of credit as may be prescribed by the Monetary Board of the Bangko Sentral ng Pilipinas through regulations.

What are the information required to be furnished to the debtor or borrower?

(1) the cash price or delivered price of the property or service to be acquired;
(2) the amounts, if any, to be credited as down payment and/or trade-in;
(3) the difference between the amounts set forth under clauses (1) and (2);
(4) the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in terms of pesos and centavos; and
(7) the percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation.

When and how should these information be furnished to the debtor or borrower?

The information enumerated above must be disclosed to the debtor or borrower prior to the consummation of the transaction. The information must be clearly stated in writing.

What is the effect on the obligation in case of violations to the Truth in Lending Act?

The contract or transaction remains valid or enforceable, subject to the penalties discussed below.

What are the penalties in case of violation?

1. Any creditor who violates the law is liable in the amount of P100 or in an amount equal to twice the finance charged required by such creditor in connection with such

transaction, whichever is the greater, except that such liability shall not exceed P2,000 on any credit transaction. The action must be brought within one year from the date of the occurrence of the violation.

2. The creditor is also liable for reasonable attorney’s fees and court costs as determined by the court.

3. Any person who willfully violates any provision of this law or any regulation issued thereunder shall be fined by not less than P1,00 or more than P5,000 or imprisonment of not less than 6 months, nor more than one year or both.

However, no punishment or penalty under this law shall apply to the Philippine Government or any agency or any political subdivision thereof.

(Here’s the full text of the Truth in Lending Act)

12 thoughts on “The Truth in Lending Act explained

  1. Lory

    Hi Atty.,

    I would like to ask if a pre-need company lending money to its planholders where their plans waiting for maturity are used as collaterals coevered by the Truth in Lending Act?

    Thank you so much.

    Reply
  2. mhalou

    3 taon na po ako nagbabayad ng motor in installment basis ..inabot na po ng 100k….puro penalty,,,tubo na pinatutubuan pa tsms po ba un

    Reply
    1. Luis

      Ang loan interest po ay puwedeng itaas kahit hindi pa ito due? Halimabawa po, nagloan ako at payable po for three years, ngayon two years na po at malapit na akong matapos ang ginawa ng ahensiya dahil hindi na ako nakahulog itinaas po ang interest na ipinatong sa utang halos doble ang dating simple interestt ginawa pa na compounded pati na ang surcharge, legal po ba ito? puwede ko po bang kuwestiyunin ang ginawa nila?

      Reply
  3. jane

    Gus day, i make a loan to a financing, i mortgage my truck, but after 3 months i find hard time to pay, i told them that i willing to give my unit, but they told me that unit will eventually adjust the appraised value, it means they will get the unit and i will still pay money for the difference of new appraise value of the unit.is it their right to change the appraised value of the unit in our contract?

    Reply
  4. mayet

    Tanong ko po. .nangutang po ako ng pera at kapalit nag issue ng tseke. . Hindi po ako nakabayad. . Ung utang ko 35k lahat ngayon siningil ko ang babayaran ko ay aabot ng 72,400… delayed ko is 5 months then 10% ang tubo nkalagay dko nabasa kung ang penalty sobra laki. Allowed ba yon?please reply. Alam ko pwede ko habulin dahil nag issue ako ng check. Ano maganda at tama ko gawin?thank you very much

    Reply
  5. Angel

    I have been paying an interest of 8percent per month sa nautang ko na worth 300k. Every month po ako nagbabayad ng walang delay. Nakikiusap po ako sa hiniraman ko na kung pwede po babaan yung interest para makabawas ako sa capital na nahiram ko pero ayaw po pumayag. Nadelay po ako this month lang dahil nagkasakit po ako at pilit niyang pinapabayad na ang buong kapital. Humihingi po ako ng terms pero ayaw po niya. Ano po ang karapatan ko? Pumirma po ako sa may nahiram po ako sakanya ngunit wala po kaming interes na nakasulat sa kasulatan.

    Reply
  6. Vangie g

    Hi po.ask ko lng po may nahiram ako 100k sa lending company at tinubuan nila ng almost 80k kasama po ng 10k na hiningi nila bgo irelease ang 100k…18months to pay po.ibinayad ko un sa agency as placement fee for dh…ngkaprob po ako abroad kya 3months lng ako abroad then umuwi na…nkapagbigay na ko ng apat na buwan sa lending 9340pesos ang monthly ko dhl nalelate may dagdag na 10percent.ngayon po two months n ko d nkkabayad dhl wla p ko work…nakiusap po ako kanila kng pwedeng gawing 3k muna monthly bayaran ko atlalakihan ko na lng kpg nkaalis ulit ako kc plan ko magsingapore…pwede po bang maging option ang ganun at valid ba ng magdagdag sila ng 10percent interest?ano po ba ang nkasaad na per annum na interest sa batas?salamat po

    Reply
  7. GLEN PAD

    HI GUD DAY KUMUHA PO AKO NG TV FOR INSTOLMEN 12 MONTHS SA AEON CREDIT BALE 3,600 N PO ANG NAIHULOG KO, TAPOS HINDI NA PO AKO NAKAPAG HULOG ISANG TAON N ANG NAKALIPAS MY KASO PO BA AKO PAKISAGOT PO .. SA EMAIL KO NLNG PO GOD BLESS////

    Reply
  8. Beth

    Nangutang po kami ng asawa ko sa isang lending company (Doctor Cash). Nagka problema po kami sa pag bayad dahil sa hinold ang sweldo ng asawa ko at na debitan naman ako sa bank account ko (possible compromised). Naniningil po sila sa amin ngayon… nagbabanta, nananakot at nanghaharass. Pati po yung mga character reference namin ay tine text po nila at hinaharass. Pwede po ba nila ito gawin sa amin? May karapatan po ba sila mang banta, manakot at mangharass? Wala po kaming pinirmahan na kahit anong form sa kanila. Through email lang lang naging transactions. Pwede po ba paki email sa akin ang sagot dito sa katanungan ko? Salamat po

    Reply
  9. Ricky

    Gud am po atty. Ask ko lng po kung totoo bang pagnamatay n ang taong nagloan. Automatically burado n ang utang nya kahit hnd pa cla (lending) nakapagkaltas? Tnx po pls! Reply in my email add

    Reply
  10. jay

    good evening po, nag inquire po ako sa lending company dito po sa paco, nung nandon na po ako sinabe po nla n mag fill up daw po ako ng form para maprocess daw po, after po mag fill up po nag insist po sila na mag cash advance , di ko pumayag but insist po nla and i decided na 5k lng kasi di pa naman po ako decided pa talaga, after a week po irereturn ko na po yung pera 5k hindi po pumayag ang lending na ireturn ang 5k they was advicing me na bago po mareturn yung pera ay i release ko po muna po yung actuall amount ng loan para maprocess po yung cancellation, and after po nun bumalik po ako sa date na pinababalik po nla ako, but hindi po nla tinangap yung pera, kahit po may charges and penalty nabuo ko po naman. ngayon po ayaw nla tangapin yung cancellation of loan. pano po ba ang dapat kong gawin, salamat.

    Reply
  11. Mary

    Magandang umaga po. Ako po ay nag loan sa isang lending company year 2010 or 2011. Sa pagkaka alam ko po ay nkabyad n ako sa knila dahil may collector n pumunta s akin. Lasy year po may nag punta dto galing sa kumpanya nila at sinisingil ako ng nasa mahigit 100k dhil daw sa interest kya lumaki. Sbi ko s loob ng mahabang panahon hindi nila ako ininform n may balanse p ako di naman ako umalis sa trabaho o kaya lumipat ng bahay. Di ko rin kasalanan kung ang tauhan nila ay nagluko pala at di ipinapasok ang bayad ko. Di ko naman din po alam na hindi pumapasok ang byad ko. Meron po b akong karapatan? O wala po akong magagawa kung hindi mag byad ng sinisingil nila s akin. S loob ng apat n taon di naman po sila nag inform tapos biglang pupunta sa akin at maniningil ng pagkalaki laki. Maaari po bang maghulog lamang ng kya ko lamang dahil wala akong maipakita sa kanila n record o resibo ng pinag bayaran ko nuon di ko naman po alam na hindi ipinapasok ang hulog ko?

    Reply

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