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.

98 thoughts on “The Truth in Lending Act explained

  1. Joy

    Good evening. I just want to know if what can I do if I let another borrower used my name in borrowing money then the borrower who use my name suddenly disappear without paying the whole amount she borrowed. Because of compassion I let her used my name without thinking that she might used it for her own interest. Thus, the manager of the lending company wants to confiscate some of my properties. Give me some pieces of advice. I will wait for your response. Thank you

    Reply
  2. anonymous08

    Hi Atty,

    Hope u can help me, kc may loan me sa Doctor cash and i keep on paying the interest coz i cannot pay the loan anymore. From 5k loan now nsa Php19450 na ata and am telling them to pay in installment but they will not accept it. Nsa legal na daw and to avoid will just pay 1500 for another extension of 30 days.niloloko ko lang sarili ko kc di ko na kayang byaran ang loan sa sobrang laki na ng interest nila ts pag nagectend magbayad pa ng interest na 1500 dun pa lang sa binabayad na 1500 for the extension of loan bayad na sna me sa loan ko sa knila. Sana nman pumayag sila na byaran sila thru installment para walng ganito na di sila mbayaran.

    Reply
  3. Anon

    Hello! I have a loan din po sa Doctor Cash. Way back 2016. Kaso nawalan ako ng work. 4k lang yun niloan ko so ang nakuha ko is lime 3700 kasi binawas na yun interest or whatsoever they call it. Now, ang laki na ng amount na kailangan ko bayaran. Almost 18k na. Makukulong po ba ako if ever kasi nagpapadala sila ng letter sa dati ko pang address eh sabi ko, change address na ko. Ayaw naman nila pumayag ng installment. Ayaw din nila update un address ko. Badly needed your advice.

    Reply
  4. Janice

    Good day!ask lang po ako kung normal ba na harrasin ng mga online lender na ito ang mga taong malapit sayo di lang po pamilya pati mga katrabaho?sa batas pi ba natin ilan araw po ba grace petiod bago maka bayad ng utang?tama bang yun inutang mo e may bawas ng interest at pagbalik ay may tubo pa din?Ano po ba tama interest sa pagpapautang sa pilipinas?at kung ang mga online lending na ito ay legal?salamat po

    Reply
  5. JGELLYN SANTIAGO

    Good day Atty!

    May loan po ako with ROBOCASH PH amounting 4500 php po and na overdue po ako ng 3 months po then gusto ko na po sana isettle hinihingan nila ako ng total of 12,237.50 php po. Tama po ba yun na ganun kali ang interest dahil sa 3 mnths daw po ako di naka bayad. Thank you and God Bless!!

    Reply
  6. marry jane

    Hello Everyone, My name is Mrs.marry jane. Nakatira ako sa USA at ako ay isang masayang babae ngayon? at sinabihan ko ang aking sarili na ang anumang tagapagpahiram na ililigtas ang aking pamilya mula sa aming mahihirap na sitwasyon, sasabihin ko sa sinumang tao na naghahanap ng utang sa kanya, binigyan niya ako ng kaligayahan sa akin at sa aking pamilya, ako ay nangangailangan ng utang na $ 150,000.00 simulan ang aking buhay sa buong bilang ako ay isang solong ina na may 2 bata nakilala ko ito tapat at DIYOS takot tao loan tagapagpahiram na makakatulong sa akin na may isang utang ng $ 150,000.00 US. Dollar, siya ay isang GOD na natatakot sa tao, kung ikaw ay nangangailangan ng utang at babayaran mo ang utang mangyaring makipag-ugnay sa kanya sabihin sa kanya na Mrs.marry jane, na sumangguni sa iyo sa kanya. makipag-ugnay sa mr larry sa pamamagitan ng email: Salamat sa iyo.

    Reply
  7. Stacey

    Me too i applied at Doctor Cash for 5K and 4200 lang nkuha ko because of Processing Fee and due to financial problem i was not able to pay the loan amount but i always pay the prolongation fee of 1500.Sa 1500 monthly na binababyad ko sobra na naibyad ko sa knila sa inutang ko then it reaches 19k plus plus.ANd then i decided to stop the prologation fee kc tumataas lang ng tumataas ang amount na kailanagn byaran.Nagemail ako sa knila if pwede thru installment ko byaran pero di cla pumapayag one time payment lang daw. Eh di ko na kayang bayaran kc taas na ng interest nila.aside sa prologation loan fee interest pa ng 1500.ah grabe nman.

    Reply
  8. Annalyn

    hello po atty…. nakapag loan po Ako ng halagang 10k sa isang Bangko… 24 weeks to pay… 600 every week may savings ng 100… bigla po kaming napalipat ng bahay.. Kada wenesday po ang hulugan simula nung lumipat po Ako lagi na po Ako late magbayad… late Lang po ng oras Pero nakakapag bayad po din Ako nung araw na un… hangang sa matapos ko na po ung cycle na 24 weeks… ang prob. ko po is ayaw nilang I release ung savings ko na 3900 Kasi daw po penalty ko na daw po un Kasi lagi daw po akong late…. natapos ko naman po ung cycle sa tamang araw… bakit Di po Nila I release… ung TO po ang nagsabi sa akin… simula nung mag release Ako Hindi ko nahahawakan ang passbook ko po… kahit mag makaawa Ako Hindi na daw po makukuha un… ang hulugan po ay wenesday 8am… minsan po hapon na Ako nakakapag padala ng hulog Pero the same day po rin po un… natapos ko ung loan ng 24 weeks sa tamang araw… papanu po ang gagawin ko atty.. kailangan ko po ang Pera eh Malayo po po Ako Pangasinan po po Ako and Batangas po yang Bangko na Yan…Sana po matulungan nyo po Ako….Salamat po

    Reply

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