The Truth in Lending Act Explained
The Truth in Lending Act Explained
The Truth in Lending Act Explained
Published by Atty. Fred October 8th, 2007 in Banking and Corporate and Investments.
(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 attorneys 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.
(Heres the full text of the Truth in Lending Act)
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3765)
REPUBLIC ACT No. 3765
AN ACT TO REQUIRE THE DISCLOSURE OF FINANCE CHARGES IN CONNECTION WITH
EXTENSIONS OF CREDIT.
(Related posts: The Truth in Lending Act explained; Regulating the Business of Lending - Part
1 and Part 2)
Section 1. This Act shall be known as the "Truth in Lending Act."
Section 2. Declaration of Policy. It is hereby declared to be the policy of the State to protect
its citizens from a lack of awareness of the true cost of credit to the user by assuring a full
disclosure of such cost with a view of preventing the uninformed use of credit to the detriment
of the national economy.
Section 3. As used in this Act, the term
(1) "Board" means the Monetary Board of the Central Bank of the Philippines.
(2) "Credit" 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.
(3) "Finance charge" includes interest, fees, service charges, discounts, and such other
charges incident to the extension of credit as the Board may by regulation prescribe.
(4) "Creditor" means 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.
(5) "Person" means any individual, corporation, partnership, association, or other organized
group of persons, or the legal successor or representative of the foregoing, and includes the
Philippine Government or any agency thereof, or any other government, or of any of its
political subdivisions, or any agency of the foregoing.
Section 4. 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, to the extent
applicable and in accordance with rules and regulations prescribed by the Board, the following
information:
(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;
On
(5) the total amount to be financed;
II.
of Insurance
(7)Provision
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.
Section 5. The Board shall prescribe such rules and regulations as may be necessary or
proper in carrying out the provisions of this Act. Any rule or regulation prescribed hereunder
may contain such classifications and differentiations as in the judgment of the Board are
necessary or proper to effectuate the purposes of this Act or to prevent circumvention or
evasion, or to facilitate the enforcement of this Act, or any rule or regulation issued
thereunder.
ALL CONCERNED
Section 6. (a) Any creditor who in connection with any credit transaction fails to disclose to
any person any information in violation of this Act or any regulation issued thereunder shall be
liable to such person 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. Action to
recover such penalty may be brought by such person within one year from the date of the
occurrence of the violation, in any court of competent jurisdiction. In any action under this
subsection in which any person is entitled to a recovery, the creditor shall be liable for
reasonable attorney's fees and court costs as determined by the court.
(b) Except as specified in subsection (a) of this section, nothing contained in this Act or any
regulation contained in this Act or any regulation thereunder shall affect the validity or
enforceability of any contract or transactions.
(c)
Any person
willfully
violates
any provision
of this
or any
regulation
Pursuant
to the who
Social
Reform
and Poverty
Alleviation
Act Act
of 1997
(Republic
Actissued
8425),
thereunder shall be fined by not less than P1,00 or more than P5,000 or imprisonment for not
the
National Anti-Poverty Commission (NAPC), an agency under the Office of the
less than 6 months, nor more than one year or both.
(1) Development
of
Approved:
June 22, 1963
Abstract microfinance
of "Truth in products
Lending and
Act"services
Republic Act No. 3765
Section 1.
Section 2.
Declaration of Policy. It is hereby declared to be the policy of the State to protect its
citizens from a lack of awareness of the true cost of credit to the user by assuring a full
disclosure of such cost with a view of preventing the uninformed use of credit to the
detriment of the national economy.
XXX
XXX
XXX
Section 3.
XXX
XXX
(3) "Finance charge" includes interest, fees, service charges, discounts and such other
charges incident to the extension of credit as the Board may by regulation prescribe.
XXX
XXX
XXX
Section 4.
Any creditor shall furnish to each person to whom credit is extended, prior to the
consummation of the transaction, a clear statement in writing stating forth, to the
extent applicable and in accordance with rules and regulations prescribed by the Board,
the following information:
(1)
the cash price or delivered price of the property or service to be acquired;
(2)
(3)
the difference between the amounts set forth under clauses (1) and (2);
(4)
(5)
(6)
(7)
the percentage that the finance charge bears to the total amount to be
financed expressed as a simple annual rate on the outstanding unpaid
balance of the obligation.
XXX
XXX
XXX
Section 6.
(a)
XXX
(c)
XXX
(e)
Section 7.
Any creditor who in connection with any credit transaction fails to disclose to
any person any information in violation of this Act or any regulation issued
thereunder shall be liable to such person in the amount of PhP 100 or in an
amount equal to twice the finance charge required by such creditor in
connection with such transaction, whichever is greater, except that such
liability shall not exceed PhP 2,000 on any credit transaction.
XXX
XXX
Any person who willfully violates any provision of this Act or any regulation
issued thereunder shall be fined by not less than Php 1,000 nor more than
PhP 5,000 or imprisonment for not less than 6 months, nor more than one
year or both.
XXX
XXX
Any final judgment hereafter rendered in any criminal proceeding under this
Act to the effect that a defendant has willfully violated this Act shall be prima
facie evidence against such defendant in action or proceeding brought by any
other party against such defendant under this Act as to all matters respecting
which said judgment would be an estoppel as between the parties thereto.
You might start by looking for a mortgage at the bank where you have your checking or
savings account. But dont limit yourself. A wide variety of institutions make home
mortgage loans, including savings and loan associations, commercial banks, mutual
savings banks, and mortgage companies. The mortgages these institutions offer will have
varying features. One way to find the creditor with the most attractively priced loan is to
look in your local newspaper; check to see if it publishes a shoppers guide to mortgage
credit. These shoppers guides are available in many localities and can be used to identify
the lenders with low rates. But, basically, the way to find the loan with the most attractive
terms is to shop around.
You should have in mind some of the things to look for in a mortgage loan. For example,
what types of loans are available from a given institution? Does the lender make privately
or federally insured or guaranteed loans? Some lenders offer mortgage loans backed by a
federal agency such as the Federal Housing Administration (FHA loans) or the
Department of Veterans Affairs (VA loans). Loans that are not government-insured are
called conventional mortgages. Insured mortgages may be more attractive than
conventional mortgages in some ways--such as lower down payment requirements. But
they may be more restrictive in other ways; for example, they may be available only for
certain kinds of homes, or for properties whose value is below a specified price.
Other factors important to your mortgage decision are the length of the loan and the down
payment required by the lender. The longer the term and the larger the down payment, the
smaller your monthly payments will be. The interest rate is important too, and in some
cases the amount of the down-payment will influence the interest rate that you pay (the
larger the down payment, the lower the interest rate). In addition, mortgage loans may
have interest rates that will stay fixed for the life of the loan (fixed-rate mortgages), that
may change (adjustable-rate mortgages, or ARMs), or that represent a combination of
fixed and variable rates (convertible mortgages). The initial rate of an ARM is generally
lower than the rate available on a fixed-rate mortgage; but remember, the rate may
change during the lifetime of the loan. Dont hesitate to ask the lender how one loan
differs from another, how the different features of the loan will affect the mortgage, or
whether your chances to qualify would improve if you made a higher down payment.
When you're shopping around, you will find that some home mortgage lenders have
special programs to assist veterans and low-income or first-time homebuyers. Ask the
lender if such programs are available.
Lenders also will examine your file at the credit bureau to learn if you pay your bills on time. A
lender may reject your application if the report shows that you have a poor credit history. Thus,
you may want to make sure your credit file is accurate before you apply for your mortgage. You
have a right to know what information is contained in your credit report and to have someone
from the credit bureau help you understand what the report says. The names of credit bureaus can
be found in the phone book.
You can prepare for questions about your financial condition by using the worksheets in this
brochure. Worksheet 1 helps determine how much money you might have available for a monthly
payment--just list all items of income and payments required on debts that wont be paid off
within ten months. Theres also a place for the estimated mortgage payment quoted by the lender.
To figure the mortgage payment, the lender will begin by asking how much you want to borrow.
The maximum loan amount will be determined by the value of the property and your personal
financial condition. To estimate the value of the property, the lender will ask a real estate appraiser
to give an opinion about its value. The appraisers opinion can be an important factor in
determining whether you qualify for the size of mortgage you want. Lenders usually will lend the
borrower up to a certain percentage of the appraised value of the property, such as 80 or 90
percent, and will expect a down payment making up the difference. If the appraisal is below the
asking price of the home, the down payment you planned to make and the amount the lender is
willing to lend you may not be enough to cover the purchase price. In that case, the lender may
suggest a larger down payment to make up the difference between the price of the house and its
appraised value.
When looking at your projected mortgage payment and existing debt, some lenders might use
ratios such as "28 and 36" to determine whether you qualify for the loan. These are commonly
used ratios.
In the case of "28 and 36," the 28 refers to the percentage of your gross income (before taxes) that
may be spent on housing expenses, including principal and interest on the mortgage, real estate
taxes, and insurance. The 36 refers to the income that may be spent for payments on all your debts
(including the mortgage): the monthly payments on your outstanding debts, when added to the
monthly housing expenses, may not exceed 36 percent of your gross income. When you talk to a
lender, find out what ratios will be used to evaluate your application. Then use Worksheet 2 to
calculate whether you are within the lender's guidelines.
Be prepared to provide certain documentation about your income (W2s for prior years and yearto-date pay stubs), current debts (account number, outstanding balance, and creditors address for
each), and the purchase contract for the home you want to buy. When you file your application,
ask the lender how long the approval process will take. The time may vary depending on the
complexity of your mortgage, current market conditions, and whether you have to provide
additional information. Its common for a decision to be made within 30 days after the lender
receives all the necessary information. Applications for FHA or VA loans may take longer.
If your application is turned down, federal law requires the lender to tell you, in writing, the
specific reasons for the denial. Make sure you understand the reasons given--you may be able to
find answers or alternatives that will satisfy the institutions lending standards. Even if that
doesnt happen, understanding fully why the loan was denied may improve your chances with the
next lender you visit. Factors that may affect the loan decision include:
Downpayment
Is your proposed down payment sufficient? If not, perhaps the lender offers other types of
mortgages with lower down-payment requirements.
Appraisal
Is the size of the mortgage you need too high, given the propertys appraised value? If similar
houses in the neighborhood have sold at prices comparable to yours, maybe the appraiser
undervalued the property. Suggest that the lender re-examine the appraisal. You also have the right
to receive a copy of the appraisal if you have paid for it.
Credit history
Is the lender doubtful--because of your level of debt or credit history--about your ability to make
the monthly payment? Ask how your debt ratios compare to the lenders standards. If there were
special circumstances surrounding old credit problems, ask for a chance to explain.
Worksheet 1
Monthly Income (before taxes)
Borrower
CoBorrower
Total
$ _______
$ _______
$ _______
Overtime
_______
_______
_______
Commissions
_______
_______
_______
Interest/dividends
_______
_______
_______
Other
_______
_______
_______
Base employment
income
$ _______
_______
_______
_______
Student loan
_______
_______
_______
Credit cards
_______
_______
_______
Alimony, etc.
_______
_______
_______
Other
_______
_______
_______
Total monthly
payments
$ _______
_______
_______
Insurance premiums
_______
$ _______
Worksheet 2
Take the dollar amounts from Worksheet 1 and:
For the housing expense ratio,
Divide Total monthly housing expense by Total
monthly income =
___________
___________
Attorneys
They can advise you whether the
treatment you received gives you legal
grounds for bringing a lawsuit against the
lender. They can tell you about monetary
damages and other types of relief
available to individuals who can prove
that illegal discrimination occurred.
Federal
Laws Against Discrimination in
Home Financing
Home
Loan
BPI
Pre-Processing Requirements
Housing Loan Application Loan Application Form (duly accomplished)
Collateral Documents
Two (2) sets of clear photocopy of TCT/CCT (all pages including blank pages with the book
and page/volume number indicated on the front page)
Lot Plan with Location/Vicinity Map certified by licensed Geodetic Engineer
Photocopy of Tax declaration / Tax receipts / Tax clearance
For construction/renovation purposes:
o Building Plans (complete set)
o Bill of Materials / Specifications / Cost estimates
o Scope of Work (for renovation of P500,000 & below)
Building Permit
Refinancing of Loan
Official Receipts or Cleared Checks or Bank Statements where amortization payments are
debited (last 6 months)
Statement of Account from the other bank showing outstanding loan balance
Appraisal Fee
PhP 3,000.00 ( Non-refundable and must be submitted with all the pre-processing
requirements)
Post-Approval Requirements
Additional requirements upon loan approval:
a. DOCUMENTS
o Original Owner's copy of Transfer Certificate Of Title
o Certified True Copy of the latest Realty Tax Declaration on land and improvements
under the name of the borrower / mortgagor
o Original Copy of latest Real Estate Tax Clearance
o Photocopy of latest Real Estate Tax Receipts
o Photocopy of latest Community Tax Certificate (signed photocopy; include CTC of
signatories if corporate borrower)
o Health Declaration (form supplied) for MRI enrollment with Ayala Life, if applicable
o Medical examination with Ayala Life, if applicable
o Fire / Lightning / Earthquake Insurance coverage through BPI MS, if applicable
o Opening of Deposit account with any BPI or BPI Family Savings Bank branch
o For corporate borrowers, Board Resolution / Secretary's Certificate (form supplied), if
applicable
o Four (4) copies duly notarized Special Power of Attorney (form supplied), if
applicable
b. FEES
o Mortgage Registration Fee
o Mortgage Redemption Insurance
b. Debtor shall refer to the borrower or personal entity granted a loan by the LC.
c. Quasi-Bank shall refer to an entity or financial institution authorized by the Bangko
Sentral ng Pilipinas to engage in quasi-banking functions or to borrow funds through
issuance, endorsement or assignment with recourse or acceptance of deposit substitutes as
defined in Section 95 of Republic Act No. 7653, otherwise known as the New Central
Bank Act, for purposes of relending or purchasing of receivable and other obligations to
more than nineteen (19) non-institutional persons.
d. Subsidiary shall refer to a corporation more than fifty percent (50%) of the voting
stock of which is owned by a bank or quasi-bank.
e. Affiliate shall refer to a corporation, the voting stock of which, to the extent of fifty
(50%) or less, is owned by a bank or quasi-bank or which is related or linked to such
institution through common stockholders or such other factors as may be determined by
the Monetary Board of the Bangko Sentral ng Pilipinas.
f. SEC shall refer to the Securities and Exchange Commission.
g. DTI shall refer to the Department of Trade and Industry.
h. DILG shall refer to the Department of Interior and Local Government.
i.BSP shall refer to the Bangko Sentral ng Pilipinas.
j. BIR shal refer to the Bureau of Internal Revenue.
SECTION 4. Form of Organiztion An LC shall be established as a corporation;
provided that, existing LCs organized as single proprietorships or partnerships shall cease
from engaging in the business of granting loans to the public unless, these existing LCs
convert into corporations within ONE (1) YEAR after the date of effectivity of this Act.
No LC shall conduct business unless granted a License to Operate by the DTI.
SECTION 5. Citizenship Requirements At least majority of the subscribed and
outstanding capital stock on an LC shall be owned by citizens of the Philippines.
SECTION 6. Paid-Up Capital Requirements All LC shall have a paid-up capital of not
less than ONE MILLION (Php 1,000,000.00) PHILIPPINE PESOS.
SECTION 7. Maintenance of Books of Accounts and Records Every LC shall maintain
books of accounts and records as may be prescribed by the DTI.
The Manual of Accounts prescribed by the Bangko Sentral for LC shall continue to be
adopted by LC for uniform recording and accounting of their operations, until the DTI
shall have prescribed a new Manual of Accounts.
SECTION 8. Registration of Securities- All securities, such as but not limited to bonds,
debentures, notes, investment contracts, evidence of indebtedness issued by an LC to
more than nineteen (19) non-institutional persons, shall be registered with the SEC,
pursuant to Sections 8 and 12 of the Securities and Regulation Code, and shall likewise
require a quasi-banking license issued by the Bangko Sentral ng Pilipinas.
If an LC shall issue securities to not more than nineteen (19) persons, it need not register
such securities, provided, that it shall file with the DTI of BSP, as the case may be, a
Disclosure Statement.
SECTION 9. Amount and Changes on Loans An LC shall grant loans in such amounts
and reasonable interest rates and charges as may be agreed upon between the LC and the
borrower or debtor. Provided, however, that, the agreement shall be in compliance with
the provisions of Republic Act No. 3765, otherwise known as the Truth in Lending Act
and Republic Act. No. 7394, otherwise known as the Consumer Act of the Philippines;
and provided however, that the Monetary Board, in consultation with DTI and the
industry, may prescribe such interest rate as may be warranted by prevailing economic
and social conditions.
SECTION 10. Delineation of Authority Between SEC & DTI The incorporation of LC
shall be administered by the SEC following pertinent laws, rules and regulations being
implemented by said Commission. The DTI, on the other hand, shall have supervision
and regulation over the operations of these LC.
SECTION 11. Delineation of Authority Between DTI and Bangko Sentral LCs which
are subsidiaries and affiliates of banks and quasi-banks shall be subject to Bangko Sentral
supervision and examination in accordance with Republic Act No. 7653.
SECTION 12. Periodic Reportorial Requirements Every LC shall file with the DTI a
Schedule of Liabilities, identifying the debtors and indicating the maturity pattern of
transactions, as well as other reports as DTI may further provide. The reports shall be
signed under oath by the companys principal executive officer and principal financial
officer.
SECTION 13. Inspection Powers of the DTI Having jurisdiction and supervision over
LCs after their incorporation, the DTI shall be allowed under this law to make the
necessary inspection of records and books of accounts, as well as inspection and or entry
into the premises of the LCs principal places of business during working hours or upon
reasonable grounds warranting the necessity to make such inspection and or entry, as the
case may be. The DTI shall promulgate in its rules and regulations what reasonable
grounds may warrant said inspection and or entry.
SECTION 14. Penalty A fine of not less than TEN THOUSAND PHILIPPINE PESO
(Php 10,000.00) of imprisonment of not less than SIX (6) months but not more than TEN
(10) years both at the discretion of the court, shall be imposed upon any person who shall
violate any provision of this Act.
SECTION 15. Suppletory Application of Other Laws The provisions of Republic Act
No. 3765, otherwise known as the Truth in Lending Act, Republic Act. No. 7394 or the
Consumer Act of the Philippines and other existing laws, insofar as they are not in
conflict with any provision of this Act, shall apply in matters not otherwise specifically
provided for this Act.
SECTION 16. Entities Excluded by this Act All entities, whether stock or non-stock
corporations, which do not declare any dividends to its stockholders or profits to its
members, receiving donations, grants, aid or contributions from local or foreign entities
for the purpose of giving assistance or support in the form of small loans to help alleviate
the poor and low-income households, cooperatives duly registered with the pertinent
government agency charged with the supervision of cooperatives, associations and
partnerships, which may be engaged in direct lending shall be excluded from the
coverage of this Act.
SECTION 17. Promulgation of Implementing Rules and Regulations Within forty five
(45) days from the effectivity of this Act, the Department of Trade and Industry (DTI),
Department of Social Welfare and Development (DSWD), in consultation with the
Bangko Sentral ng Pilipinas, the Bureau of Internal Revenue and other key government
and non-government institutions, shall promulgate the necessary implementing rules and
regulations of this Act.
SECTION 18. Separability Clause If any provision of this Act or the application thereof
to any person or circumstances is held invalid, the other provisions of this Act and the
application of such provisions to other persons or circumstance shall not be affected
thereby.
SECTION 19. Effectivity This Act shall take effect, fifteen (15) days following the
completion of its publication in the Official Gazette or in two (2) national newspapers of
general circulation.
Approved,
Following are some of the basic questions often asked of lending investors (LIs), financing companies (FCs) and pawnshops.
Lending investors (LIs) are in the business of granting direct loans to the public. Does BSP then supervise
operations of LIs?
No. BSP does not supervise the operations of LIs as there is no specific law granting BSP supervisory powers over LIs.
No. An LI should get a license from the city or municipality where it intends to operate or do business. Moreover, if an LI is
organized as a single proprietorship, it has to register its business with the Dept. of Trade and Industry (DTI). If it is a
partnership or a corporation, its Articles and By-laws must be registered with the Securities and Exchange Commission (SEC).
While LIs grant direct loans to the public, they do not engage in financing operations like discounting, factoring and leasing
activities, primary functions allowed only of financing companies under Republic Act 5980. LIs cannot undertake these FC
activities without proper authority from the SEC.
LIs are not allowed to accept personal items, e.g., jewelry, precious stones as pledge or securityto the loan since these are
pawnbroking activities. An LI is not allowed to engage in operations of a pawnshop and vice versa.
Under existing law, BSP has supervision over FCs that are granted BSP authority to engage in quasi-banking function or
borrow from the public. These are known as "NBQBs" or "quasi-banks." The BSP also has supervision over FCs that are
subsidiaries or affiliates of banks or NBQBs that are engaged in allied activities.
Republic Act 5980, otherwise known as The Financing Companu Act, and its Implementing Rulesgovern the operations of
financing companies
What then is the concern of BSP regarding non-bank financial intermediaries (NBFIs), e.g. LIs and FCs,
that are not affiliates of banks or NBQBs?
- BSP requires NBFIs to submit certain documentary requirements for listing in the BSP directory of NBFIs as well as
financial statements for statistical purposes.
- Its main concerns are the NBFIs' compliance with the 19-lender limit and Truth in Lending Act.
The Supervision and Examination Department III (SED III) in the Supervision and Examination Sector.
What about pawnshops? Can these commence operations without registering with the BSP?
No. A licensed pawnshop cannot legally commence business operations unless it is registered with, and has obtained a
certificate of registration from BSP, through SED III.
The pawnbroker's license or permit shall be secured from the local government of the city or municipality where the pawnshop
is to be located. The business name of the pawnshop to be established should be registered with the DTI, if it is a single
proprietorship, or with the SEC if it is a corporation or a partnership.
Pawnbroking activities are governed by Presidential Decree No. 114, otherwise knowm as the Pawnshop Regulation Act.
On 22 May 2007, Republic Act No. 9474, also known as the Lending Company
Regulation Act of 2007, was approved. The law is consistent with the delcared policy
of the State to regulate the establishment of lending companies and to place their
operation on a sound, efficient and stable condition to derive the optimum advantages
from them as an additional source of credit; to prevent and mitigate, as far as practicable,
practices prejudicial to public interest; and to lay down the minimum requirements and
standards under which they may be established and do business. Heres a basic discussion
of the new law:
What is a Lending Company?
It refers to a corporation engaged in granting loans from its own capital funds or from
funds sourced from not more than nineteen (19) persons. It shall not be deemed to include
banking institutions, investment houses, savings and loan associations, financing
companies, pawnshops, insurance companies, cooperatives and other credit institutions
already regulated by law. The term shall be synonymous with lending investors.
What is the form of organization for a lending company?
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