Firms required to fully detail loan terms by 2012
FIRMS WILL have to provide more details to clients that pay on
installment basis by July next year or face penalties under a Securities
and Exchange Commission (SEC) order which adopted a central bank circular.
SEC Memorandum No. 7, issued on Sept. 15, outlined fines for creditors
that fail to disclose finance charges and net proceeds of the loan --
among others -- to borrowers.
The SEC order laid down the following penalties:
• P20,000 and P100 for each day of continuing violation for the first
offense;
• P25,000 and P100 for each day and continuing violation for the second
offense;
• P30,000 and P100 for each day and continuing violation for the third
offense.
The fourth offense will merit a suspension or revocation of the firm's
authority to operate, the SEC order read.
"This memorandum circular…shall take effect on July 1, 2012," the order,
signed by SEC Chairman Teresita J. Herbosa, stated.
The purpose of such is to "protect the uninformed use of credit by
borrowers or users and in compliance with the Truth in Lending Act."
The 1963 law covers any business that not only extends credit but also
sells or rents out property or services on an installment basis.
The penalties were detailed after the SEC en banc resolved on Aug. 18 to
adopt the Bangko Sentral ng Pilipinas (BSP) Circular 730 Series of 2011.
The BSP circular, issued in July this year, also orders lenders to
detail "the percentage that the finance charge bears to the total amount
to be financed expressed as a simple annual rate or an effective annual
interest rate."
Each borrower must then be furnished a copy of the disclosure statement,
prior to the completion of the transaction.
The BSP circular further requires creditors to put up posters in their
offices informing the public about the law.
This is on top of requirements under the Truth in Lending Act which also
orders firms to disclose the cash price or delivered price of the
property or service to be acquired, the amounts to be credited as
downpayment or trade-in, and the difference between the delivery price
and the downpayment.
The SEC order imposes penalties that are higher than that required under
the 1963 law which penalizes violators of up to P5,000 in fines and
imprisonment for not more than one year.
The Truth in Lending Act aims to protect the citizens from lack of
awareness of the true cost of credit. -- CHCV
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CARLOS ANI - SEEDFINANCE Corporation - http://www.seedfinance.net
Email: carlosani@seedfinance.net
Landline Phones: +63495010127 and +63495762924
Cellphone: +639152919580
DEVJOBS - http://www.devjobsmail.com
PHILDEVFINANCE - http://phildevfinance.posterous.com
CONSULTING - http://www.carlosani.com
My News Clippings - http://www.myclipps.posterous.com
Family website: http://www.anifamily.net
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