SPECIAL COMMERCIAL LAW
LAW ON SECRECY OF BANK DEPOSITS R.A.1405 is no longer limited to deposits governed by the law on loans giving rise to creditor-debtor
I. Purpose
 to give encouragement to the people to deposit their money in banking institutions;
 to discourage private hoarding so that the same may be properly utilized by banks in
authorized loans to assist in the economic development of the country
II. Prohibited Acts
1. Examination/inquiry/looking into all deposits of whatever nature with banks or banking
institutions in the Philippines (including investment in bonds issued by the government)
by any person, government official or office (RA 1405, Sec. 2).
 Considered ABSOLUTELY CONFIDENTIAL in nature
2. Disclosure by any official or employee of any banking institution to any unauthorized
person of any information concerning said deposit (RA 1405, Sec. 3).
 Those not covered by the prohibition:
 Non-bank official or employee is not covered by the prohibition;
 Disclosure by a bank official or employee of information about bank deposit in
favor of a co-employee in the course of the performance of his duties covered by
the prohibition
III. Deposits Covered
1. All deposits of whatever nature with banks or banking institutions found in the
Philippines;
 Not just limited to deposits governed by the law on loans giving rise to
creditor-debtor relationship but it covers fund of whatever nature so long as
the bank may use and utilize it in authorized loans.
2. Investments in bonds issued by the Philippine government, its branches, and
institutions. (R.A. 1405, Sec. 2)
3. Trust accounts are included in the scope of the law.
 intended not merely to remain with the bank but to be invested by it elsewhere
 Despite such pronouncement that trust funds are considered deposits, trust
funds remain not covered by PDIC.
relationship but it covers fund of whatever nature so long as the bank may use and utilize it in authorized
loans.
The money deposited under the trust agreement (“Trust account”) is intended not merely to remain with
the bank but to be invested by it elsewhere. To hold that this type of account is not protected by R.A.
1405 would encourage private hoarding of funds that could otherwise be invested by banks in other
ventures, contrary to the policy behind the law (Ejercito v. Sandiganbayan, G.R. No. 157294-95,
November 30, 2006). Despite such pronouncement that trust funds are considered deposits, trust funds
remain not covered by PDIC.
The confidentiality granted by the law does NOT extend to other documents and records like L/C’s,
TR’s, bank drafts and promissory notes.
IV. Exceptions
a) Upon written consent of the depositor (RA 1405, Sec. 2)
b) In cases of impeachment (ibid)
c) Upon order of competent court in cases of bribery or dereliction of duty of public
officials (ibid)
d) In cases where the money deposited or invested is the subject matter of the
litigation (ibid)
e) Upon order of the Commissioner of Internal Revenue in respect of the bank
deposits of a decedent for the purpose of determining such decedent’s gross estate
(NIRC, Sec. 6[F][1])
f) Upon the order of the Commissioner of Internal Revenue in respect of bank
deposits of a taxpayer who has filed an application for compromise of his tax
liability by reason of financial incapacity to pay his tax liability (ibid)
g) The Commissioner of Internal Revenue is authorized to inquire into bank deposits
of a specific taxpayer upon request for tax information from a foreign tax authority
pursuant to an international convention or agreement on tax matters to which the
Philippines is a party (ibid)
h) In case of dormant accounts/deposits for at least 10 years under the Unclaimed
Balances Act (Act No. 3936, Sec. 2)
i) The prohibition against examination of bank deposit does not preclude its
garnishment to satisfy a judgment against the depositor (Oñate v. Abrogar, G.R.
No. 107303, February 21, 1994)
PADALLA, SHEILAH MAE;PURUGGANAN DONELI CARMEL 1

j) Presidential Commission on Good Government (PCGG) may require the
production of bank records material to its investigation (Opinion of the Secretary
of Justice, February 27, 1987)
k) The Anti-Money Laundering Council (AMLC) may inquire into any deposit with
any bank in case of violation of the RA 9160 or the AMLA if there is probable
cause that it is related to an unlawful activity (RA 9160, as amended, Sec. 11)
l) The PDIC and the BSP may examine deposit accounts and all information related
to them in case of a finding of unsafe or unsound banking practices (RA 3591, as
amended, Sec. 8)
m) With court order:
 In cases of unexplained wealth under Sec. 8 of the Anti-Graft and
CASES:
Corrupt Practices Act (PNB v. Gancayco)
 In cases filed by the Ombudsman and upon the latter’s authority to
examine and have access to bank accounts and records (Marquez v.
Desierto)
n) Without court order:
If the AMLC determines that a particular deposit or investment with any banking
institution is related to the following:
 Hijacking,
 Kidnapping,
 Murder,
 Destructive Arson, and
 Violation of the Dangerous Drugs Act.
 Acts of Terrorism or in violation of Human Security Act.
o) In case the law is repealed, superseded or modified by any law to the contrary.
V. Garnishment of deposits, including foreign deposits
 The prohibition against examination or inquiry does not preclude its
being garnished for satisfaction of judgment. The disclosure is purely
incidental to the execution process and it was not the intention of the
legislature to place bank deposits beyond the reach of judgment creditor
(PCIB v. CA, G.R. No. 84526, January 28, 1991).
 Foreign currency deposits shall be exempt from attachment,
garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever (RA 6426,
Sec 8). However, the application of Sec. 8 of RA 6426 depends on the
extent of its justice. The garnishment of a foreign currencydeposit should
SPECIAL COMMERCIAL LAW
be allowed to prevent injustice and for equitable grounds, otherwise, it
would negate Article 10 of the New Civil Code which provides that “in
case of doubt in the interpretation or application of laws, it is presumed
that the lawmaking body intended right and justice to prevail (Salvacion
v. Central Bank of the Philippines, G.R. 94723, August 21, 1997).
VI. Penalties for violation
 Any violation of this law will subject offender upon conviction, to an
imprisonment of not more than five years or a fine of not more than twenty
thousand pesos or both, in the discretion of the court. (Sec. 5)
JOSEPH VICTOR G. EJERCITO vs. SANDIGANBAYAN (Special Division) and
PEOPLE OF THE PHILIPPINES
[G.R. Nos. 157294-95, November 30, 2006]
FACTS:
JV Ejercito is being prosecuted for violation of R.A. 7080, or otherwise known as “An
Act Defining and Penalizing the Crime of Plunder”. The Sandiganbayan issued Subpoenas
Duces Tecum/Ad Testificandum directing the President of Export and Industry Bank (EIB,
formerly Urban Bank) or his/her authorized representative to produce Ejercito’s Trust
Account and Savings Account. Upon learning from the media about the issuance of the
subpoenas, Ejercito filed a Motion to Quash the said subpoenas claiming his bank accounts
are covered by R.A. No. 1405 (The Secrecy of Bank Deposits Law) and do not fall under
any of the exceptions stated therein. He further claimed that the specific identification of
documents in the questioned subpoenas, including details on dates and amounts, could only
have been made possible by an earlier illegal disclosure thereof by the EIB and the
Philippine Deposit Insurance Corporation (PDIC) in its capacity as receiver of the then
Urban Bank. The disclosure being illegal, petitioner concluded, the prosecution in the case
may not be allowed to make use of the information.
ISSUE:
1. Whether or not Ejercito’s Trust Account is covered by the term “deposit” as used
in RA No. 1405?
PADALLA, SHEILAH MAE;PURUGGANAN DONELI CARMEL 2

2. Whether or not the information contained in the subpoena was obtained a prior
illegal disclosure of Ejercito’s bank accounts, in violation of the “fruit of the
poisonous tree” doctrine
RULING:
1. R.A. 1405 is broad enough even to cover the Trust Account. An examination of
the law shows that the term "deposits" used therein is to be understood broadly
and not limited only to accounts which give rise to a creditor-debtor relationship
between the depositor and the bank. The money deposited under an account may
be used by banks for authorized loans to third persons, then such account,
regardless of whether it creates a creditor-debtor relationship between the
depositor and the bank, falls under the category of accounts which the law
precisely seeks to protect for the purpose of boosting the economic development
of the country.
In the present case, Ejercito’s Trust Account is, without doubt, one such account.
The Trust Agreement between petitioner and Urban Bank provides that the trust
account covers "deposit, placement or investment of funds" by Urban Bank for
and in behalf of Ejercito. The money deposited under trust account was, therefore,
intended not merely to remain with the bank but to be invested by it elsewhere.
The protection afforded by the law is, however, not absolute, there being
recognized exceptions thereto, as above-quoted Section 2 provides. In the present
case, two exceptions apply, to wit: (1) the examination of bank accounts is upon
order of a competent court in cases of bribery or dereliction of duty of public
officials, and (2) the money deposited or invested is the subject matter of the
litigation.
Cases of unexplained wealth are similar to cases of bribery or dereliction of duty
and no reason is seen why these two classes of cases cannot be excepted from the
rule making bank deposits confidential. The policy as to one cannot be different
from the policy as to the other. This policy expresses the notion that a public office
is a public trust and any person who enters upon its discharge does so with the full
knowledge that his life, so far as relevant to his duty, is open to public scrutiny.
Section 1(d)" of R.A. No. 7080 states:
SPECIAL COMMERCIAL LAW
Ill-gotten Wealth means any asset, property, business enterprise or
material possession of any person… acquired by him directly or
indirectly through dummies, nominees, agents, subordinates and or
business associates by… receiving, directly or indirectly, any
commission, gift, share, percentage, kickbacks or any other form of
pecuniary benefit from any person and/or entity in connection with
any government contract or project or by reason of the office or
position of the public officer concerned.
Plunder being thus analogous to bribery, the exception to R.A. 1405 applicable in cases
of bribery must also apply to cases of plunder.
2. R.A. 1405 nowhere provides that an unlawful examination of bank accounts shall
render the evidence obtained therefrom inadmissible in evidence. Section 5 of R.A.
1405 only states that "any violation of this law will subject the offender upon
conviction, to an imprisonment of not more than five years or a fine of not more than
twenty thousand pesos or both, in the discretion of the court."
Even assuming arguendo, however, that the exclusionary rule applies in principle to
cases involving R.A. 1405, the Court finds no reason to apply the same in this
particular case. Clearly, the "fruit of the poisonous tree" doctrine13 presupposes a
violation of law. If there was no violation of R.A. 1405 in the instant case, then there
would be no "poisonous tree" to begin with, and, thus, no reason to apply the doctrine.
LOURDES T. MARQUEZ, in her capacity as Branch Manager, Union Bank of the Philippines
vs. HON. ANIANO A. DESIERTO, (in his capacity as OMBUDSMAN, Evaluation and
Preliminary Investigation Bureau, Office of the Ombudsman, ANGEL C. MAYOR-ALGO, JR.,
MARY ANN CORPUZ-MANALAC and JOSE T. DE JESUS, JR., in their capacities as
Chairman and Members of the Panel, respectively
G.R. No. 135882. June 27, 2001
FACTS:
Marquez received an Order from Ombudsman Desierto to produce several bank documents for purposes
of inspection in camera relative to various accounts maintained at Union Bank of the Philippines.
PADALLA, SHEILAH MAE;PURUGGANAN DONELI CARMEL 3
 SPECIAL COMMERCIAL LAW

However, Marquez wrote the Ombudsman explaining to him that the accounts in question cannot readily is to fish for additional evidence to formally charge Amado Lagdameo, et. al., with the Sandiganbayan.
be identified and asked for time to respond to the order. The reason forwarded by Marquez was that Clearly, there was no pending case in court which would warrant the opening of the bank account for
despite diligent efforts and from the account numbers presented, and they cannot identify these accounts inspection.
since the checks are issued in cash or bearer. She surmised that these accounts have long been dormant,
hence are not covered by the new account number generated by the Union Bank system. Ombudsman
issued an order to direct Marquez to produce the bank documents due to the unjustified delay by the
Bank since the in-camera inspection had already been extended twice. The Ombudsman cited Marquez’s
act constitutes disobedience of or resistance to a lawful order issued by this office and is punishable as
Indirect Contempt under Section 3(b) of R.A. 6770. The same may also constitute obstruction in the
lawful exercise of the functions of the Ombudsman which is punishable under Section 36 of R.A. 6770.

Marquez together with Union Bank of the Philippines, filed a petition for declaratory relief, prohibition
and injunction against Ombudsman. The petition was intended to clear the rights and duties of petitioner.
Thus, petitioner sought a declaration of her rights from the court due to the clear conflict between R. A.
No. 6770, Section 15 and R. A. No. 1405, Sections 2 and 3. They prayed for a temporary restraining
order (TRO) because the Ombudsman and other persons acting under his authority were continuously
harassing them to produce the bank documents relative to the accounts in question. Moreover, the
Ombudsman issued another order stating that unless petitioner appeared before the FFIB with the
documents requested, petitioner manager would be charged with indirect contempt and obstruction of
justice.

ISSUE:

Is a camera -inspection order allowed under RA No. 1405?

RULING:

No.

The order of the Ombudsman to produce for in camera inspection the subject accounts with the
Union Bank of the Philippines, Julia Vargas Branch, is based on a pending investigation at the Office of
the Ombudsman against Amado Lagdameo, et. al. for violation of R. A. No. 3019, Sec. 3 (e) and (g)
relative to the Joint Venture Agreement between the Public Estates Authority and AMARI.

Before an in-camera inspection may be allowed, there must be a pending case before a court of
competent jurisdiction. Further, the account must be clearly identified, the inspection limited to the
subject matter of the pending case before the court of competent jurisdiction.

There is yet no pending litigation before any court of competent authority. What is existing is
an investigation by the office of the Ombudsman. what the Office of the Ombudsman would wish to do

PADALLA, SHEILAH MAE;PURUGGANAN DONELI CARMEL 4


TRUTH IN LENDING ACT
I. Purpose
 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.
II. Obligation of creditors to person whom credit is extended:
Any creditor shall furnish to each person 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
Monetary Board of the Central Bank of the Philippines, 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;
(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.
 The contract covering the transaction or any other document to be acknowledged
and signed by the debtor, shall indicate the above seven (7) items of information.
SPECIAL COMMERCIAL LAW
In addition, the contract or document shall specify additional charges, if any,
which will be collected in case certain stipulations in the contract are not met by
the debtor. (BSP MEMORANDUM NO. M-2008-020, Issued May 14, 2008)
III. Covered and excluded transactions
COVERED:
a. Credit - 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.
b. Finance charge - interest, fees, service charges, discounts, and such
other charges incident to the extension of credit as the Board may,
by regulation, prescribe
EXCLUDED:
a. Those which do not involve the payment of any finance charges by
the debtor
b. Where the debtor is the one specifying a definite, and fixed set of
credit terms such as bank deposits, insurance contracts, sale of
bonds, etc.
IV. Consequences of non-compliance with obligation
1. Any creditor who in connection with any credit transaction fails to disclose
to any person any information in violation of RA 3765 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.
PADALLA, SHEILAH MAE;PURUGGANAN DONELI CARMEL 5

 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.
 Except as specified in subsection (a) of this section, nothing contained in
RA 3765 or any regulation contained in RA 3765 or any regulation
thereunder shall affect the validity or enforceability of any contract or
transactions.
2. Any person who willfully violates any provision of RA 3765 or any
regulation issued thereunder shall be fined by not less than P1,00 or more
than P5,000 or imprisonment for not less than 6 months, nor more than one
year or both.
 No punishment or penalty provided by this Act shall apply to the
Philippine Government or any agency or any political subdivision
thereof.
 A 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 an 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.
CASES:
DEVELOPMENT BANK OF THE PHILIPPINES v. FELIPE P. ARCILLA, JR.
[G.R. NO. 161397, June 30, 2005]
FELIPE P. ARCILLA, JR. v. DEVELOPMENT BANK OF THE PHILIPPINES
G.R. NO. 161426 June 30, 2005
FACTS:
SPECIAL COMMERCIAL LAW
Atty. Felipe P. Arcilla, Jr. was employed by DBP. He decided to avail of a loan under the
Individual Housing Project of the bank and obliged himself to pay the loan in 25 years, to be deducted
from his monthly salary. After two years, Arcilla opted to resign from the bank. Conformably with the
Deed of Conditional Sale, the bank informed him that the balance of his loan account with the bank had
been converted to a regular housing loan.
Arcilla signed three Promissory Notes. He was also obliged to pay service charge and interests.
However, Arcilla also agreed to the reservation by the DBP of its right to increase (with notice to him)
the rate of interest on the loan, as well as all other fees and charges on loans and advances.
Upon his request, DBP agreed to grant Arcilla an additional cash advance of ₱32,000.00. Thereafter a
Supplement to the Conditional Sale Agreement was executed.
Arcilla failed to pay his loan account, advances, penalty charges and interests. Hence, DBP rescinded
the Deed of Conditional Sale by notarial act. Nevertheless, it wrote Arcilla giving him time within which
to repurchase the property upon full payment of the current appraisal or updated total, whichever is
lesser. Arcilla failed to respond. Consequently, the property was advertised for sale at public bidding.
Four years after, Arcilla filed a complaint against DBP. He alleged that DBP failed to furnish him with
the disclosure statement required by Republic Act (R.A.) No. 3765 and Central Bank (CB) Circular No.
158 prior to the execution of the deed of conditional sale and the conversion of his loan account with the
bank into a regular housing loan account.
The trial court rendered judgment in favor of Arcilla and nullified the notarial rescission of the deeds
executed by the parties. The CA rendered judgment setting aside and reversing the decision of the RTC.
ISSUE:
Whether or not petitioner DBP complied with the disclosure requirement of R.A. No. 3765 and CB
Circular No. 158, Series of 1978, in the execution of the deed of conditional sale, the supplemental deed
of conditional sale, as well as the promissory notes
RULING:
The petition of Arcilla has no merit.
Section 1 of R.A. No. 3765 provides that prior to the consummation of a loan transaction, the bank, as
creditor, is obliged to furnish a client with a clear statement, in writing, setting forth, to the extent
PADALLA, SHEILAH MAE;PURUGGANAN DONELI CARMEL 6

applicable and in accordance with the rules and regulations prescribed by the Monetary Board of the
Central Bank of the Philippines, 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;
(5) the total amount to be financed;
(6) the finance charges expressed in terms of pesos and centavos; and
(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.
In the present case, DBP failed to disclose the requisite information in the disclosure statement form
authorized by the Central Bank, but did so in the loan transaction documents between it and Arcilla.
There is no evidence on record that DBP sought to collect or collected any interest, penalty or other
charges, from Arcilla other than those disclosed in the said deeds/documents.1avvphi1.zw+
The Court is convinced that Arcilla's claim of not having been furnished the data/information required
by R.A. No. 3765 and CB Circular No. 158 was but an afterthought. Despite the notarial rescission of
the conditional sale in 1990, and DBP's subsequent repeated offers to repurchase the property, the latter
maintained his silence. Arcilla filed his complaint only on February 21, 1994, or four years after the said
notarial rescission.
SPECIAL COMMERCIAL LAW
SPOUSES EDUARDO and LYDIA SILOS, Petitioners vs. PHILIPPINE NATIONAL
BANK, Respondent.
G.R. No. 181045 July 2, 2014
FACTS:
Spouses Silos have been in business for about two decades of operating a department store and buying
and selling ready-to-wear apparel. Spouses Silos then secured a revolving credit line with the PNB
through a real estate mortgage as a security. After two years, their credit line increased. They then signed
a Credit Agreement, which was also amended 2 years later, and several Promissory Notes (PN) as regard
their Credit Agreements with PNB. The said loan was initially subjected to a 19.5% interest rate per
annum.
In the Credit Agreements, Spouses Silos bound themselves to the power of PNB to modify the interest
rate depending on whatever policy that PNB may adopt in the future without need of notice upon them.
Thus, the said interest rates played from 16% to as high as 32% per annum. Spouses Silos acceded to the
policy by pre-signing a total of 26 PNs leaving the individual applicable interest rates at hand blank since
it would be subject to modification by PNB.
Spouses Silos regularly renewed and made good on their PNs, religiously paid the interests without
objection or fail. However, during the 1997 Asian Financial Crisis, Spouses Silos faltered when the
interest rates soared. The 26th PN became past due and despite repeated demands by PNB, they failed
to make good on the note. Thus, PNB foreclosed and auctioned the involved security for the mortgage.
Spouses Silos instituted an action to annul the foreclosure sale on the ground that the succeeding interest
rates used in their loan agreements was left to the sole will of PNB, the same fixed by the latter without
their prior consent and thus, void.
The RTC ruled that such stipulation authorizing both the increase and decrease of interest rates as may
be applicable is valid. The CA affirmed the RTC decision.
ISSUE:
Whether or not PNB, on its own, modify the interest rate in a loan agreement.
RULING:
PADALLA, SHEILAH MAE;PURUGGANAN DONELI CARMEL 7
 SPECIAL COMMERCIAL LAW

By requiring the petitioners to sign the credit documents and the promissory notes in blank, and then
unilaterally filling them up later on, respondent violated the Truth in Lending Act, and was remiss in its
disclosure obligations. In one case, which the Court finds applicable here, it was held:
UCPB further argues that since the spouses Beluso were duly given copies of the subject
promissory notes after their execution, then they were duly notified of the terms thereof, in
substantial compliance with the Truth in Lending Act.
The Supreme Court disagreed. Section 4 of the Truth in Lending Act clearly provides that the disclosure
statement must be furnished prior to the consummation of the transaction:
SEC. 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;
Act. The belated discovery of the true cost of credit will too often not be able to reverse the ill effects of
an already consummated business decision.
With all the previous cases decided by the Supreme Court, including the present one, they involve
identical or similar provisions found in respondent’s credit agreements and promissory notes. These
stipulations must be once more invalidated, as was done in previous cases. The common denominator in
these cases is the lack of agreement of the parties to the imposed interest rates. For this case, this lack of
consent by the petitioners has been made obvious by the fact that they signed the promissory notes in
blank for the respondent to fill.
The fact that petitioners later received several statements of account detailing its outstanding obligations
does not cure respondent’s breach. The belated discovery of the true cost of credit does not reverse the
ill effects of an already consummated business decision
Neither may the statements be considered proposals sent to secure the petitioners’ conformity; they were
sent after the imposition and application of the interest rate, and not before. And even if it were to be
presumed that these are proposals or offers, there was no acceptance by petitioners. "No one receiving a
proposal to modify a loan contract, especially regarding interest, is obliged to answer the proposal."

(3) the difference between the amounts set forth under clauses (1) and (2); The Supreme Court GRANTED the petition and declared the second up to the twenty-sixth Promissory
Notes as NULL and VOID.
(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.

The rationale of this provision is to protect users of credit from a lack of awareness of the true cost
thereof, proceeding from the experience that banks are able to conceal such true cost by hidden charges,
uncertainty of interest rates, deduction of interests from the loaned amount, and the like. The law thereby
seeks to protect debtors by permitting them to fully appreciate the true cost of their loan, to enable them
to give full consent to the contract, and to properly evaluate their options in arriving at business decisions.
Upholding UCPB’s claim of substantial compliance would defeat these purposes of the Truth in Lending

PADALLA, SHEILAH MAE;PURUGGANAN DONELI CARMEL 8