TILA

Question 1

What’s the policy of TILA? (Truth in lending)

Answer 1

To protect its citizens from
-A lack of awareness of the true cost of credit to the user
-Assuring full disclosure of such cost
-With a view of preventing the uninformed use of credit to the detriment of the national economy

Question 2

What’s the purpose of TILA?

Answer 2

1. Protect debtors from effects of misrepresentation or concealment
2. Permit the debtor to fully appreciate and evaluate the real cost of his borrowings
3. To avoid circumvention of usury rules

Question 3

According to some circular something bs, the method of computing interests is?

Answer 3

Banks may ONLY charge based on the
-Outstanding balance of the loan
-At the beginning of an interest period (installment period if its payable in installments)

Marketing materials and presentation must be consistent with the memorandum circular

Question 4

Who are the regulators of TILA?

Answer 4

BSP (Monetary board)
-Prescribes the rules and regulation as may be necessary

SEC (In charge of lending companies)
Exception: When the lending companies are subsidiaries and affiliates of banks and quasi-banks
Cooperative Development Authority (Cooperatives)
(Just the non finance related stuff, they make it very clear that banking stuff for cooperatives is still under the BSP)
Insurance Commission (Insurance companies and mutual benefit associations)

Question 5

According to some circular something bs (BSP Circular No. 730s.2011, the SEC also uses this), the information to be disclosed is?

Answer 5

General Rule
-Loan terms shall be disclosed to all types of borrower
Exception
-For small business/retail/consumer credit/micro/small cooperatives the following are the minimum information to be disclosed
-Total Amount to be financed
-The finance charges expressed in terms of pesos and centavos
-The net proceeds of the loan
-The % that the finance charge bears to the total amount to be financed expressed as a simple annual rate or an effective annual interest rate

Banks are required to furnish each borrower a copy of the disclosure statement, PRIOR to the consummation of the transaction

Question 5

What are the obligations a creditor has as defined by these series of laws?

Answer 5

Any creditor shall FURNISH to each person to whom credit is extended PRIOR to the consummation of the transaction, a CLEAR STATEMENT, in writing a recital of specific info. (Basically Full disclosure)
Information is:
1. 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 in 1. and 2.
4. The charges INDIVIDUALLLY 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
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

Question 5

According to some circular something bs (BSP Circular No. 730s.2011, the SEC also uses this), the information to be disclosed for posters is?

Answer 5

Banks shall post in conspicuous places in their principal place of business and branches, the information as contained in the revised format of disclosure statement

The posters shall include an explicit notification that the disclosure statement is required attachment to the loan contract and the customer has a right to demand a copy of such disclosure

Question 6

What is the manner of disclosure on all of these?

Answer 6

1. In a separate written disclosure statement
2. In the covering contract or any other document to be acknowledged and signed by the debtor
3. Posted in conspicuous places in the principal place of business of the creditor
4. In marketing materials and presentations

Question 6

What happens for creditors are in non compliance?

Answer 6

For transactions
Failure to disclose means the not itemized charges cannot be collected, and if they were paid, can be recovered.
If it was a willful violation of TILA, it shall not affect the validity/enforceability of any contract/transaction just the collectability of charges

For creditor
Liable in the amount of PHP 100, or in an amount equal to twice the finance charge required by such creditor whichever is greater (but not exceeding 2k)
For willful violation, liable to a fine of not less than 1,000 pesos or more than 5,000 or imprisonment for not less than 6, but not more than 1 year or both

Prescriptive period
May be brought by the borrower within 1 year from the date of the occurrence of the violation

Question 6

What is a creditor as defined by these series of laws?

Answer 6

A creditor means
1. Any person engaged in the business of extending credit
2. Any person who as a regular business practice makes loans or sells or rents property or services on a time, credit, or installment basis, either as principal or as agent who requires us an incident to the extension of credit, the payment of a finance charge.

Question 6

What is a credit sale?

Answer 6

Its technically not part of TILA but it is adjacent to it.
Credit sale means a sale of products, services, or an interest in land to a person on credit where a debt is payable in installments or a finance charge is imposed and includes any agreement in the form of a bailment of products or lease of products or real property if the bailee or lessee pays or agrees to pay compensation for use a sum substantially equivalent to or in excess of the aggregate value of the products or real property involved and it is agreed that the bailee or lessee will become, or for no other a nominal consideration has the option to become, the owner of the products or real property upon full compliance with the terms of the agreement.

Its minimum reqs are
1. Cash price/Delivered price of the property/service to be acquired
2. Amounts to be credited as down payment
3. Difference of 1 and 2 (Aka total amount financed)
4. The charges individually itemized
6. The finance charge expressed in terms of pesos and centavos
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
8. Effective interest rate
9. The number, amount, and due dates/periods of payments scheduled to repay the indebtedness
10. The default/delinquency charge or other similar charges payable in the event of late payments

Question 6

What is a consumer loan?

Answer 6

A loan made by the lender to a person which is payable in installments for which a finance charge is or may be imposed. (This term includes credit transactions)

Its minimum reqs are
1. The amount of credit the debtor will actually have
2. All the charges, individually itemized which are included in the amount of credit extended but are not part of the finance charge
3. Sum of 1 and 2
6. The finance charge expressed in terms of pesos and centavos
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
8. Effective interest rate
10. The default/delinquency charge or other similar charges payable in the event of late payments
11. Description of any security interest held to or be held/retained/acquired by the creditor in connection with the extension of credit and a clear identification of the property to which the security interest relates (Basically collateral)

Question 7

Okay so differentiate Consumer loan, credit sale, TILA

Answer 7

Consumer Loans are the least stringent and I think is referring directly more to loans where you just get flat cash.
Credit sale has a longass definition but I think refers more to the amount you owe for availing a product or service.
TILA has the most requirements even if all 3 are similar also broadly covers the purposes of both of those

Question 7

What does the term credit mean under the law?

Answer 7

1. Any loan, mortgage, deed of trust, advance or discount
2. Any conditional sales contract, any contract to sell/sale of property/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
3. Any rental purchase contract
4. Any contract or arrangement for the hire, bailment, or leasing of property
5. Any option, demand, lien, pledge, or other claim against or for the delivery of property or money
7. Transaction or series of transactions having similar effects

All these are covered by TILA

Question 7

What isn’t covered by TILA?

Answer 7

1. Those which do not involve the payment of finance charges by the debtor
2. Transactions where the debtor is the one specifying a definite and fixed set of credit terms such as bank deposits, insurance contracts, and sale of bonds

Question 8

What’s the Effect of Final judgement?

Answer 8

A final judgement rendered in any criminal proceeding under TILA that ruled that a defendant has willfully violated the act shall be considered prima facie evidence against the defendant in an action proceeding brought by any other party

Basically if in a previous case the creditor got judged as willfully violating TILA, that judgement now becomes prima facie (face value evidence) for future cases basically giving the assumption that he willfully violated it again