Lesson 7: Bank Secrecy Law (Republic Act No.

1405, As Amended)

Exercises: Situational questions. Each answer must be supported by a legal basis.

1. A obtained a loan from XYZ Bank/ What are the information required to be furnished to
him relative to his loan application?
Answer: In accordance with the RA 3765 also known as the Truth in Lending Act, 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;

(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.

2. In case the bank failed to provide the needed information to be disclosed to its
borrower, will it affect the validity of their contract?
Answer: According to Section 4 of RA 3765 or known as the Truth in Lending Act, 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;
(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.
Any information not provided that are stated above will mean that the creditor fails to provide the
needed information to be disclosed to its borrower. In the situation, it is the bank who must
furnish the following information to its borrower.

However, this failure to disclose the needed information to its borrower does not affect the
validity of the contract. The contract is still valid but the creditor will be liable for some damages
in accordance with Section 6 (a) and (b) of this Act (RA 3765).

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.

3. A’s wife wanted to know the financial status of her husband. Can he inquire from the
bank of her husband considering that they are husband and wife?
Answer: No, they cannot inquire of such a bank account even if they are husband
and wife unless the respective permission of the depositor is given.

4. What are the covered deposits under the Bank Secrecy Act?
Answer: All deposits of whatever nature in banks or banking institutions in the
Philippines including investments in bonds issued by the government of the Philippines, its
political subdivisions, and its instrumentalities

5. What are those deposits which are not protected by the Bank Secrecy Act?
Answer: All that are above are not covered once permission is given by the
depositor, in impeachment cases or by the order of a competent court in such cases of
bribery or dereliction of duty of public officials or if such is subject to litigation.