Truth in Lending Act

PURPOSES OF THE LAW
1. To protect the debtor from the effects of misrepresentation and concealment;
2. To permit him to fully appreciate and evaluate the real cost of his borrowing; and
3. To avoid circumvention of usury laws.

The Truth in Lending Act (R.A. No. 3765), was enacted primarily “to protect its citizens from a lack of awareness of the true cost of credit to the user by using a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy.” (Sec. 2, R.A. No.
3765).

DUTIES OF THE CREDITOR UNDER THIS ACT
Under this Act, any person extending “credit” must give the debtor, in writing, a recital of:
1. Cash price,
2. Amount credited if on installment price,
3. The difference between the cash and installment price,
4. Recital of the finance charges and what these charges bear to the amount to be financed in percentage.

INFORMATION REQUIRED TO BE STATED [Sec. 4, RA 3765]
Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth the following:

1. The cash price or delivered price of the property or service to be acquired. Meaning of cash price or delivered price:
— in case of trade transactions, it is the amount of money which would constitute full payment upon delivery of the property or service purchased at the creditor’s
place of business
— in financial transactions, it is the amount of money received by the debtor upon
consummation of the credit transaction, net of finance charges collected at the
time the credit is extended, if any

2. The amounts, if any, to be credited as down payment and/or trade-in. DOWN PAYMENT
amount paid by the debtor at the time of the transaction in partial payment for the property
or service purchased TRADE-IN value of an asset, agreed upon by the creditor and debtor, given at the time of the transaction in partial payment for the property or service purchased

3. 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.
Meaning of non-finance charges:
— amounts advanced by the creditor for items normally associated with the ownership of the property or of the availment of the service purchased which are not incident to the extension of credit.
— in the case of the purchase of an automobile on credit, the creditor may advance the insurance premium as well as the registration fee for the account of the debtor

4. The total amount to be financed.
Meaning of amount financed:
— consists of the cash price plus nonfinance charge less the amount of the down payment and value of the trade-in

5. The finance charge expressed in terms of pesos and centavos.
Meaning of finance charge:
— includes interest, fees, collection charges, discounts, and such other charges incident to the extension of credit as the Board may by regulation prescribe
— represents the amount to be paid by the debtor incident to the extension of credit
such as interest or discounts, collection fees, credit investigation fees, attorney's
fees, and other service charges
— the total finance charge represents the difference between (1) the aggregate
consideration (down payment plus installments) on the part of the debtor, and (2) the sum of the cash price and non-finance charges

6. 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.