Rizal Technological University

Boni Avenue, Mandaluyong City

TABLE OF CONTENTS
College of Business, Entrepreneurship and Accountancy
INTRODUCTION 2
Bachelor of Science in Accountancy SECTION 1 2
PURPOSE OF RA 3765 2
SECTION 2 2
REPUBLIC ACT NO. 3765 DEBTOR PROTECTION 2
INSTILL TRANSPARENCY 2
“AN ACT TO REQUIRE THE DISCLOSURE OF FINANCE CHARGES IN
INFORMED DECISION-MAKING 2
CONNECTION WITH EXTENSIONS OF CREDIT” PROMOTE PUBLIC TRUST 2
OBLIGATION OF CREDITORS TO DEBTORS 3
Submitted by: SECTION 4 3
SIMPLE EXPLANATION 3
APROVECHAR, MARIELLE DEFINITION OF TERMS 3
ADDITIONAL REQUIREMENT OF CIRCULAR NO. 158 4
NAZ, LANCE ANGELO
COVERED AND EXCLUDED TRANSACTIONS 4
PEREZ, HAROLD CONSEQUENCES OF NON-COMPLIANCE WITH RA 3765 4

QUIÑONES, CASSANDRA NICOLE C. SECTION 6 4

SECTION 6(A)-(C) 5
TIAMSON, ARJANE C. SECTION 6(D) 5
RATIONALES OF SECTION 6(D) 6
SECTION 6(E) 6
SIMPLIFIED EXPLANATION OF SECTION 6(E) 6
CBET-01-901P
CASE ANALYSIS 6
1st Semester, S.Y. 2024-2025
FACTS 6
ISSUES 7
RULINGS 7
Submitted to: LEGAL PRINCIPLE 7
PROF. RHOLAND H. TAPALLA, CPA HOMEWORK DISCUSSION 7
Instructor
ANNEXES 11
October 03, 2024 REFERENCES 16

Truth in Lending Act | Page 1 of 16

 REPUBLIC ACT No. 3765 Debtor Protection

AN ACT TO REQUIRE THE DISCLOSURE OF FINANCE The primary goal is to prevent debtors from being unaware of the
CHARGES IN CONNECTION WITH EXTENSIONS OF true cost of credit, safeguarding them from potentially misleading or
CREDIT. unfair lending practices.

Instill Transparency

R.A. 3765 aims to instill the value of transparency to creditors by

INTRODUCTION
obligating them to provide detailed information about the debt, such
Section 1. This Act shall be known as the "Truth in Lending Act." as the cash price, down payment, finance charge, total amount to
be financed, and annual percentage rate (APR).
Republic Act No. 3765, also known as the "Truth in Lending Act,"
was enacted on June 22, 1963. This is considered the growling Provide Opportunity for Informed Decision-Making
financial watchdog of hapless borrowers.
By providing transparent information, the borrowers can easily
PURPOSE OF RA 3765 compare loan options from different lenders and choose the most
favorable terms for them. This allows debtors to make informed
Section 2. Declaration of Policy. It is hereby declared to be the decisions whether to proceed with the loan or not.
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 Promote Public Trust
such cost with a view of preventing the uninformed use of credit to Obligating lenders to strictly conform with the full disclosure of loan
the detriment of the national economy. terms and information builds confidence and trust for the public.
The purpose of the Truth in Lending Act in the Philippines is to Through this trust, people are encouraged to take loans or debt
protect debtors by requiring creditors to fully disclose all the costs, which is one of the key drivers of economic activity and investment.
terms and conditions associated with a debt. By fully disclosing all If people would stop taking loans, there would be fewer
information about the credit, it allows borrowers to provide full consumption and business investments which would decrease
consent to the contract and compare loan options to make informed money circulation. Decreased money circulation would harm the
decisions about the credit. national economy.

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OBLIGATION OF CREDITORS TO DEBTORS ● Consummation means finalization or completion; thus, the
contract or other written legal document should be provided
The obligations of the creditors to their debtors are stated in Section to the debtor before the transaction is completed or
4 of R.A. 3765. finalized.
Section 4. Any creditor shall furnish to each person to whom credit ● The written statement should explicitly state all the following
is extended, prior to the consummation of the transaction, a clear information in terms of pesos and centavos: cash price,
statement in writing setting forth, to the extent applicable and in down payments and/or trade-in, individually itemized
accordance with rules and regulations prescribed by the Board, the non-finance charges, finance charges, total amount to be
following information: financed and simple annual rate on outstanding unpaid
balance.
1. the cash price or delivered price of the property or service to
be acquired; Definition of Terms:
2. the amounts, if any, to be credited as down payment and/or As per the Circular No. 158 of the Central Bank, various terms in
trade-in; Section 4 should be defined accordingly:
3. the difference between the amounts set forth under clauses
(1) and (2); ● Cash Price or Delivered Price – the amount of money
4. the charges, individually itemized, which are paid or to be which would constitute full payment of property or service
paid by such person in connection with the transaction but upon delivery at the creditor's place of business.
which are not incident to the extension of credit; ● Down Payment – the partial amount paid by debtor at the
5. the total amount to be financed; time of transaction for property or service purchased.
6. the finance charge expressed in terms of pesos and ● Trade-in – represents the agreed upon value of asset at the
centavos; and time of transaction given as partial payment for property or
7. the percentage that the finance bears to the total amount to service purchased.
be financed expressed as a simple annual rate on the ● Finance Charge – the amount to be paid by debtor incident
outstanding unpaid balance of the obligation. to the extension of credit (e.g., interests or discounts,
attorney’s fees, and other service charges)
Simple explanation: ● Non-finance Charges – the amounts that the creditor paid
● The creditor has the responsibility of providing the debtor in advance for items normally associated to the property or
with a written statement containing all the credit details in service purchased but not incident to the extension of credit
the form of a contract or other legal document. (e.g., insurance premium and registration fee for a purchase
of automobile)

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 ● Amount to be Financed – [(cash price + non-finance ● Any contract or arrangement for the hire, bailment, or
charges) - (down payment + trade-in)] leasing of property; (Annex F)
● Simple annual rate – annual uniform percentage which ● Any option, demand, lien, pledge, or other claim against, or
represents the ratio between finance charge and amount to for delivery of, property or money; (Annex G)
be financed. ● Any purchase, or other acquisition of, or any credit upon
security of any obligation or claim arising out of any of the
Additional Requirement of Circular No. 158
foregoing; and (Annex H)
The lender is required to specify the additional charges, collectible ● Any transaction or series of transactions having a similar
in case certain stipulations in the contract are not met by the debtor, purpose or effect.
in the contract covering the credit transactions or any other
Meanwhile, there are transactions excluded or outside the scope of
document to be acknowledged and signed by the debtor. For the
the provision of RA 3765 and these are categorized into the
case of promissory notes, the penalty charges are valid if it is
following:
stipulated in the document.
● Credit transactions which do not involve the payment of any
See Annex A and B for an example
finance charge by the
debtor; and
● Credit transactions in which the debtor is the one specifying
COVERED AND EXCLUDED TRANSACTIONS a definite and fixed set of credit terms such as bank
The covered transactions under the truth in lending act are deposits, insurance contracts, sale of bonds, etc.
enumerated in Section 03 as follows:
● Any loan, mortgage, deed of trust, advance and discount;
CONSEQUENCES OF NON-COMPLIANCE WITH RA 3765
(Annex C) Section 6. (a) Any creditor who in connection with any credit
● Any conditional sales contract, any contract to sell, or sale transaction fails to disclose to any person any information in
or contract of sale of property or services, either for present violation of this Act or any regulation issued thereunder shall be
or future delivery, under which part or all of the price is liable to such person in the amount of P100 or in an amount equal
payable subsequent to the making of such sale or contract; to twice the finance charged required by such creditor in connection
(Annex D) with such transaction, whichever is the greater, except that such
● Any rental-purchase contract; (Annex E) liability shall not exceed P2,000 on any credit transaction. Action to
recover such a penalty may be brought by such person within one

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year from the date of the occurrence of the violation, in any court of the debtor is still obligated to pay the principal amount. However,
competent jurisdiction. In any action under this subsection in which finance charges such as interest and other costs will not be paid.
any person is entitled to a recovery, the creditor shall be liable for
The debtor can avail the following remedies in case of
reasonable attorney's fees and court costs as determined by the
non-compliance of the creditor:
court.
● File a civil case for recovery of damages in the amount Php
(b) Except as specified in subsection (a) of this section,
100 or of twice the finance charge required by the
nothing contained in this Act or any regulation contained in this Act
creditor, whichever is greater, but NOT to exceed
or any regulation thereunder shall affect the validity or enforceability
P2,000.
of any contract or transactions.
● If non-disclosure is willful, file a criminal case
(c) Any person who willfully violates any provision of this
Act or any regulation issued thereunder shall be fined by not less Fine 1,000 – 5,000
than P1,00 or more than P5,000 or imprisonment for not less than 6
months, nor more than one year or both. Imprisonment 6 months – 1 yr
(d) No punishment or penalty provided by this Act shall Or BOTH
apply to the Philippine Government or any agency or any political
subdivision thereof.

(e) A final judgment hereafter rendered in any criminal The complaint must be filed within ONE YEAR from the date of the
proceeding under this Act to the effect that a defendant has willfully occurrence of the violation, in any court competent jurisdiction.
violated this Act shall be prima facie evidence against such
defendant in an action or proceeding brought by any other party If the debtor successfully brings a legal action against the creditor,
against such defendant under this Act as to all matters respecting the creditor shall be liable for reasonable attorney's fees and court
which said judgment would be an estoppel as between the parties costs as determined by the court.
thereto.
Section 6(d)
Section 06(a)-(c)
States that no punishment or penalty provided by this Act shall
The credit transaction remains valid and enforceable. If the apply to the Philippine Government or any agency or any political
creditor fails to disclose the complete details of the loan contract, subdivision thereof. The Truth in Lending Act is designed to ensure
that lenders provide clear and complete information about loan

Truth in Lending Act | Page 5 of 16

terms to borrowers. It generally applies to private lenders like 2. Civil Case: In a civil lawsuit (e.g., for damages or
banks, credit unions, and lending companies. However, the compensation) brought by a borrower or another party
government or any agency or any political subdivision would not against the same person, the criminal conviction can be
face the same penalties as a private lender. used to show that they violated the act.
3. Estoppel: The person cannot deny their violation of the law
Rationales of Section 6(d):
in the civil case because the criminal court already made
1. Public service focus: Government agencies exist to serve that decision.
the public, not to make a profit like private lenders. Since
This means that if someone is guilty of willfully violating a law under
their lending practices are usually part of public programs
the Truth in Lending Act in a criminal case, this guilty verdict can be
such as housing or social services, their objectives differ
used as strong evidence which is called prima facie evidence
from private lenders which are primarily profit driven.
against that person in a separate case brought by another person
2. Internal Oversight: Government agencies have their own
under the same issue.
separate systems for addressing mistakes or transparency
issues and own oversight bodies such as Commission on
Audit that regulate their activities including lending.
CASE ANALYSIS
Section 6(e)
United Coconut Planters Bank (UCPB) vs Spouses Samuel and
States that final judgment hereafter rendered in any criminal Odette Beluso (August 17, 1994)
proceeding under this Act to the effect that a defendant has willfully
violated this Act shall be prima facie evidence against such ● Facts
defendant in an action or proceeding brought by any other party UCPB granted the spouses Beluso a promissory notes line under a
against such defendant under this Act as to all matters respecting credit agreement stating that the spouses could avail a maximum
which said judgment would be an estoppel as between the parties credit amount of Php1,200,000. The Beluso spouses constituted a
thereto. real estate mortgage to the bank resulting in the increase of
Simplified Explanation of Section 06(e): maximum credit to Php2,350,000. The promissory note created by
UCPB for signing of borrowers is quoted
1. Criminal Conviction: If a person is found guilty of willfully
breaking the Truth in Lending Act (for example, not properly “FOR VALUE RECEIVED, I, and/or We, on or before the due date,
disclosing loan terms) in a criminal prosecution, it means SPS. SAMUEL AND ODETTE BELUSO (BORROWER), jointly and
they intentionally violated the law. severally promise to pay to UNITED COCONUT PLANTERS BANK
(LENDER) or order at UCPB Bldg., Makati Avenue, Makati City,

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 Philippines, the sum of Php_______, with interest thereon at the ● Issues
rate indicative of DBD retail rate or as determined by the Branch
Whether the computation of the loan was correct and whether the
Head”
interest rate stipulation for the loan is valid.
The Beluso spouse availed the credit in 5 separate promissory
● Rulings
notes which are as follows:
On 23 March 2000, the RTC ruled in favor of the spouses Beluso.
PN # Date of PN Maturity Date Amount
Secured Judgment declares the interest rate used by UCPB void and the
8314-96-0008 29 April 1996 27 August Php700,000 foreclosure of mortgaged property void. UCPB is ordered to return
3-3 1996 the properties foreclosed; to pay the amount of ₱50,000.00 by way
8314-96-0008 2 May 1996 30 August Php500,000 of attorney’s fees; and to pay the costs of suit. The Beluso spouse,
5-0 1996 on the other hand, are ordered to pay UCPB the remaining sum of
8314-96-0002 20 November 20 March Php700,000 their credit amounting to ₱1,560,308.00.
92-2 1996 1997
97-00363-1 11 December 28 February Php200,000 ● Legal Principles
1997 1998
98-00002-4 2 January 28 February Php150,000 Republic Act No. 3765, Section 04 states that the percentage that
1998 1998 the finance bears shall be explicitly stated which the UCPB failed to
conform to.
From 1996 to February 1998 the spouses Beluso were able to pay
the total sum of ₱763,692.03. On 2 September 1998, UCPB
demanded that the spouses Beluso pay their total obligation of HOMEWORK DISCUSSION
₱2,932,543.00 plus 25% attorney’s fees, but the spouses Beluso
failed to comply therewith. On 28 December 1998, UCPB 1. What is the primary purpose of the Secrecy of Bank
foreclosed the properties mortgaged by the spouses Beluso to Deposits Law (Republic Act No. 1405)?
secure their credit line, which, by that time, already ballooned to
Under Section 1 of the Secrecy of Bank Deposits, there are
₱3,784,603.00.
mainly two purposes:
On 9 February 1999, the spouses Beluso filed a Petition for
1. To give encouragement to the people to deposit their
Annulment, Accounting and Damages against UCPB with the RTC
money in banking institutions;
of Makati City.

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 2. To discourage private hoarding so that the same may ○ In cases of impeachment of the public official
be properly utilized by banks in authorized loans to such as the President, Vice President, etc. for
assist in the economic development of the country. culpable violation of the Constitution
3. ○ Upon the order of a competent court in cases
2. Under the Secrecy of Bank Deposits Law, what acts are of bribery, dereliction of duty, involving
prohibited in relation to bank deposits? unexplained wealth under RA 3019 and
➢ Under the Secrecy of Bank Deposits Law Section 3, where the money deposited is the subject for
the prohibited acts are: litigation.
○ to disclose to another person any information ○ Upon the inquiry of the Commissioner of BIR
concerning deposits. ○ Upon the order of a competent court or
○ to inquire, examine or look into bank deposits AMLC
or bonds issued by the government. ○ Disclosure to the Treasurer of the Philippines
○ for unclaimed balances under the Unclaimed
3. Which types of bank deposits are covered by the Secrecy of Balances Act (RA 3936) and Reports of
Bank Deposits Law? banks to AMLC for suspicious transactions
○ Upon the issuance of subpoena by the
Under Section 2 of the Secrecy of Bank Deposits, all
Ombudsman
deposits of whatever nature with banks or banking
○ Upon the order of Court of Appeals
institutions in the Philippines including investments in bonds
○ When the examination is made by the BSP,
issued by the Government of the Philippines, its political
PDIC, COA and PCGG
subdivisions, and its instrumentalities, are hereby
○ When the examination is made by an
considered as of a confidential and may not be examined,
independent auditor hired by the bank for
inquired or looked into by any person, government official,
audit purposes only
bureau or office.
5. Can bank deposits, including foreign currency deposits, be
4. Identify the exceptions to the rule of confidentiality under the subject to garnishment? Explain.
Secrecy of Bank Deposits Law.
Yes bank deposits can be garnished upon the approval of
➢ Under Section 2 of the Bank Secrecy Law, the
the court and the writ of execution to satisfy the judgment
exceptions to the rule of confidentiality are:
amount owed to the creditor. However, the foreign currency
○ When there is a written permission from the
deposit is exempted for this manner. As provided in Section
depositor or investor.
8. Secrecy of foreign currency deposits in RA 6426 foreign

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 currency deposits shall be exempt from attachment, ● The written statement should explicitly state all the
garnishment, or any other order or process of any court, following information in terms of pesos and centavos:
legislative body, government agency or any administrative cash price, down payments and/or trade-in,
body whatsoever. But in certain cases where determined by individually itemized non-finance charges, finance
the court most specially the supreme court foreign currency charges, total amount to be financed and simple
deposit can be garnished. (Salvacion v. Central Bank of the annual rate on outstanding unpaid balance.
Philippines, G.R. No. 94723, Aug. 21, 1997) The Supreme
Court decision to look into the deposit of the foreign national 8. Which types of credit transactions are covered by the Truth
committed heinous crime. And where acts of the accused in Lending Act, and which are excluded?
and the grave effects on social, moral and psychological ● Any loan, mortgage, deed of trust, advance and
aspects and judgment amount is demandable. Upon the discount;
decision of SC the foreign currency deposit of the accused ● Any conditional sales contract, any contract to sell,
is hereby garnished. or sale or contract of sale of property or services,
either for present or future delivery, under which part
6. What is the purpose of the Truth in Lending Act (Republic
or all of the price is payable subsequent to the
Act No. 3765)?
making of such sale or contract;
Under Section 02 of RA 3765 the primary goal of the Truth ● Any rental-purchase contract;
in Lending Act is to protect debtors from being unaware of ● Any contract or arrangement for the hire, bailment, or
the true cost of their credit by requiring creditors to fully leasing of property;
disclose all information about the credit. ● Any option, demand, lien, pledge, or other claim
against, or for delivery of, property or money;
7. What is the obligation of creditors under the Truth in Lending ● Any purchase, or other acquisition of, or any credit
Act regarding the disclosure of credit terms? upon security of any obligation or claim arising out of
● The creditor has the responsibility of providing the any of the foregoing; and
debtor with a written statement containing all the ● Any transaction or series of transactions having a
credit details in the form of a contract or other legal similar purpose or effect.
document.
● The contract or other written legal document should Meanwhile, there are transactions excluded or outside the scope of
be provided to the debtor before the transaction is the provision of RA 3765 and these are categorized into the
completed or finalized. following:

Truth in Lending Act | Page 9 of 16

 ● Credit transactions which do not involve the payment P1,00 or more than P5,000 or imprisonment
of any finance charge by the debtor; and for not less than 6 months, nor more than one
● Credit transactions in which the debtor is the one year or both.
specifying a definite and fixed set of credit terms ○ (d) No punishment or penalty provided by
such as bank deposits, insurance contracts, sale of this Act shall apply to the Philippine
bonds, etc. Government or any agency or any political
● subdivision thereof.
9. What are the consequences for creditors who fail to comply ○ (e) A final judgment hereafter rendered in
with their obligations under the Truth in Lending Act? any criminal proceeding under this Act to the
● Under the Secrecy of Bank Deposits Law Section 6, effect that a defendant has willfully violated
the prohibited acts are: this Act shall be prima facie evidence against
○ (a). Any creditor who in connection with such defendant in an action or proceeding
any credit transaction fails to disclose to any brought by any other party against such
person any information in violation of this Act defendant under this Act as to all matters
or any regulation issued thereunder shall be respecting which said judgment would be an
liable to such person in the amount of P100 estoppel as between the parties thereto.
or in an amount equal to twice the finance ○
charged required by such creditor in 10. Explain the purpose of ensuring that finance charges and
connection with such transaction, whichever other terms of credit are disclosed to borrowers under the
is the greater, except that such liability shall Truth in Lending Act.
not exceed P2,000 on any credit transaction.
○ (b) Except as specified in subsection (a) of The importance of ensuring that finance charges and other
this section, nothing contained in this Act or terms of credit are disclosed is for debtors to be aware of
any regulation contained in this Act or any their credit and ensure that borrowers can make informed
regulation thereunder shall affect the validity decisions. This transparency helps prevent deceptive
or enforceability of any contract or practices and allows consumers to compare loan options
transactions. more effectively. By standardizing disclosures, TILA
○ (c) Any person who willfully violates any promotes fairness, protects consumers and debtors, and
provision of this Act or any regulation issued fosters competition among lenders.
thereunder shall be fined by not less than

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ANNEX A

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ANNEX B ANNEX C

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ANNEX D

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ANNEX E ANNEX F

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ANNEX G ANNEX H

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 REFERENCES
Atty. Soriano, CPA. (n.d). RFBT Quick Notes - Real Excellence

Online

Bangko Sentral ng Pilipinas. (2017). 306 “Truth In Lending Act”

Disclosure Requirement – Manual of Regulations for
Banks.https://morb.bsp.gov.ph/306-truth-in-lending-act-discl
osure-requirement-2
Supreme Court E-Library. (1963). Republic Act No. 3765 - An Act to
Require The Disclosure Of Finance Charges In Connection
With Extensions Of Credit. - Supreme Court E-Library.
https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/2/240
96
IYSB Quick Notes Online. (2023, April 7). Atty. Bagayao-Truth in

Lending Act. [Video]. YouTube.

https://www.youtube.com/watch?v=u1wSWOBlpzk

Domingo, A. (2023). Regulatory Framework and Legal Issues in

Business Part II. Truth in Lending Act/Republic Act No. 3765

Laco, R., et al. (2022). The RFBT Reviewer for the Licensure

Examination for CPAs. (2nd ed.) Philippine National Bank,

Petitioner, vs. AIC Construction Corporation, Spouses
Rodolfo c. Bacani and Ma. Aurora C. Bacani, Respondents.
G.R. No. 228904.
selibrary.judiciary.gov.ph/thebookshelf/showdocs/1/67890.

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