Thruth In Lending Act

[1]. Describe the Purpose

- To protect the public from lack of awareness of the true cost of credit by
requiring from the creditor the disclosure of full information incident to a credit
transaction.

[2]. Illustrate the Obligation of creditors to persons to whom credit is extended

Disclosure requirements
- Creditors are required to furnish to each person to whom credit is
extended, prior to the consummation of the transactions, a clear statement in
writing setting forth, to the extent applicable and in accordance with rules and
regulations prescribed by the board the ff. 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, individualy 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 totall amount to be financed
6. the finance charged expressed in terms of pesos and centavos
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

Who are lenders required to Disclose?

1. Banks and other financial institutions

2. Any person in the business of extending loans, or selling or renting
property or services on a time, credit, or installment basis, either as principal
or as agent
[3]. Compare covered and excluded transactions
[4]. Describe the consequences of non-compliance with obligation

What are the effects if the creditor fails to disclose?

a. the credit transaction remains valid and enforceable but the debtor are afforded
the ff. remedies:

1. File a civil case for recovery of damages in the amount of 100 or of twice
the finance charged required by the creditor, whichever is greater but not to
exceed 2,000
2. must be brought within one yr. from the date of the occurence of the
violation, in any court of competent jurisdiction
3. If non-disclosure is willful, file a criminal case. Penalty is fine not
less that 1,000 or more than 5,000 or imprisonment for not less than 6 months nor
more than 1 yr or both
4. The lender will have no right to collect such such charge or increases
thereof, even if stipulated in the promissory note.

Examples of Violations of truth in lending act

- Requiring debtors to sign credit documents and promissory notes in blank

and then unilaterally filling them up ater on
 - A promissory note which grants the creditor the power to unilatrerally fix
the interest rate means that the promissory not does not contain a clear statement
in writing of the finance charge.

Problem Example:
Jungkook went dynamite Bank and applied for a loan. The bank manager made him
simultaneously sign credit documents and a promissory note. On the disclosure
statement included in the credit documents, there was no mention of penalty
charges, but on the promissory note the penalty charges were detailed. On the first
month that the loan was due, Jungkook failed to pay on time. Dynamite Bank sent hin
a statement of account for the total amount due., which includes interest and
penalty charges, Jungkook contests the penalty charges and avers that he is not
liable thereto since it wasn't included on the disclosure requirement. Is Jungkook
correct?

- No, the reference to the penalty charges in the promissory note constitutes
substantial compliance with the disclosure requirement of the truth in lending act.