Legal Aspects of Credit and Collection

• REPUBLIC ACT No. 3765

  
  

  AN ACT TO REQUIRE THE DISCLOSURE OF FINANCE CHARGES IN CONNECTION WITH EXTENSIONS OF CREDIT.
• This Act shall be known as the "Truth in Lending Act."

  REPUBLIC ACT No. 3765 Section 1.
• 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

  Credit
• Includes interest, fees, service charges, discounts, and such other charges incident to the extension of credit as the Board may be regulation prescribe

  Finance charge
• Any person engaged in the business of extending credit (including any person who as a regular business practice make loans or sells or rents property or services on a time, credit, or installment basis, either as principal or as agent) who requires as an incident to the extension of credit, the payment of a finance charge

  Creditor
• Any individual, corporation, partnership, association, or other organized group of persons, or the legal successor or representative of the foregoing, and includes the Philippine Government or any agency thereof, or any other government, or of any of its political subdivisions, or any agency of the foregoing

  Person
• R.A 3765. Section 6. Penalties for creditor's failure to disclose information:


  1. 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

  2. Creditor shall be liable for reasonable attorney's fees and court costs as determined by the court

  3. Willful violation: fined by not less than P1,000 or more than P5,000 or imprisonment for not less than 6 months, nor more than one year or both
• BATAS PAMBANSA BLG. 22

  
  

  AN ACT PENALIZING THE MAKING OR DRAWING AND ISSUANCE OF A CHECK WITHOUT SUFFICIENT FUNDS OR CREDIT AND FOR OTHER PURPOSES.
• Checks without sufficient funds


  Any person who makes or draws and issues any check to apply on account or for value, knowing at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment, which check is subsequently dishonored by the drawee bank for insufficiency of funds or credit or would have been dishonored for the same reason had not the drawer, without any valid reason, ordered the bank to stop payment, shall be punished by imprisonment of not less than thirty days but not more than one (1) year or by a fine of not less than but not more than double the amount of the check which fine shall in no case exceed Two Hundred Thousand Pesos, or both such fine and imprisonment at the discretion of the court
• REPUBLIC ACT No. 9510

  
  

  AN ACT ESTABLISHING THE CREDIT INFORMATION SYSTEM AND FOR OTHER PURPOSES
• REPUBLIC ACT No. 9510. Section 1. Title.

  
  

  This Act shall be known as the "Credit Information System Act".
• REPUBLIC ACT No. 9510

  
  

  Section 2. Declaration of Policy. -

  
  

  The State recognizes the need to establish a comprehensive and centralized credit information system for the collection and dissemination of fair and accurate information relevant to, or arising from, credit and credit-related activities of all entities participating in the financial system. A credit information system will directly address the need for reliable credit information concerning the credit standing and track record of borrowers.
• An entity other than a Submitting Entity, Special Accessing Entity or Borrower that is authorized by the Corporation to access credit information from a Special Accessing Entity

  Non-Accessing Entity
• Any accredited third party provider to whom the Corporation may outsource the processing and consolidation of basic credit data pertaining to a borrower or issuer of debt or convertible securities under such qualifications, criteria and strict confidentiality guidelines that the Corporation shall prescribe and duly publish

  Outsource entity
• Information/data concerning the credit performance of a borrower such as, but not limited to, information on timely repayments or non-delinquency

  Positive credit information
• The Department of Finance, Department of Trade and Industry, Bangko Sentral ng Pilipinas, Insurance Commission and the Cooperative Development Authority

  Relevant Government Agencies
• SEC

  Securities and Exchange Commission
• A duly accredited private corporation engaged primarily in the business of providing credit reports, ratings and other similar credit information products and services

  Special Accessing Entity
• Any entity that provides credit facilities such as, but not limited to, banks, quasi-banks, trust entities, investment houses, financing companies, cooperatives, nongovernmental, micro-financing organizations, credit card companies, insurance companies and government lending institutions

  Submitting Entity
• 1. Should stay in the database of the Corporation unless sooner corrected, for not more than three (3) years from and after the date when the negative credit information was rectified through payment or liquidation of the debt, or through settlement of debts through compromise agreements or court decisions that exculpate the borrower from liability

  
  

  Negative information on the borrower
• Special Accessing Entities


  1. Shall be accredited by the Corporation in accordance with such standards and rules as the SEC in coordination with the relevant government agencies, may prescribe

  2. Shall be entitled access to the Corporation's pool of consolidated basic credit data, subject to the provisions of Sections 6 and 7 of this Act and related implementing rules and regulations

  3. Are prohibited from releasing basic credit data received from the Corporation or credit reports and credit ratings derived from the basic credit data received from the Corporation, to non-accessing entities unless the written consent or authorization has been obtained from the Borrower
• Which may process and consolidate basic credit data, are absolutely prohibited from releasing such data received from the Corporation other than to the Corporation itself

  Outsource Entities
• Shall hold strictly confidential any credit information they receive from the Corporation

  Accessing Entities
• Denial of the borrower's rights, without justifiable reason, shall entitle the borrower to indemnity
• The Corporation, the submitting entities, the accessing entities, the outsource entities, the special accessing entities and the duly authorized non-accessing entities shall hold the credit information under strict confidentiality and shall use the same only for the declared purpose of establishing the creditworthiness of the borrower

  R.A 9510 Section 6. Confidentiality of Credit Information.
• Outsource entities which may process and consolidate basic credit data are absolutely prohibited from releasing such data received from the Corporation other than to the Corporation
• The Corporation shall be authorized to release and disclose consolidated basic credit data only to the Accessing Entities, the Special Accessing Entities, the Outsource Entities and Borrowers
• The Securities and Exchange Commission has just issued new rules prohibiting several controversial abusive means to collect debts
• Financing and lending companies, as well as their third-party service providers, are allowed to exert "reasonable and legally permissible means" to collect on debts, provided they observe "good faith and reasonable conduct and refrain from engaging in unscrupulous and untoward acts"
• It is hereby declared to be the 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 such cost with a view of preventing the uninformed use of credit to the detriment of the national economy.

  Section 2. Declaration of Policy.
• refers to any submitting entity or any other entity authorized by the

  Corporation to access basic credit data from the Corporation.

  Accessing Entity
• refers to positive and negative information provided by a borrower to a submitting entity in connection with the application for and availment of a credit facility and any information on the borrower’s creditworthiness in the possession of the submitting entity and other factual and objective information related or relevant thereto in the submitting entity’s data files or that of other sources of information

  Basic Credit Data
• refers to a natural or juridical person, including any local government unit (LGU),

  its subsidiaries and affiliates, that applies for and/or avails of a credit facility.

  Borrower
• created under Republic Act No.7653.

  BSP
• refers to the Credit Information Corporation established under Section 5 of this

  Act.

  Corporation
• Refers to any loan, credit line, guarantee or any other form of financial accommodation from a submitting entity: Provided, That for purposes of this Act, deposits in banks shall not be considered a credit facility extended by the depositor in favor of the bank.

  Credit facility
• refers to an opinion regarding the creditworthiness of a borrower or of an issuer

  of debt security, using an established and defined ranking system.

  Credit Rating
• refers to a summary of consolidated and evaluated information on

  creditworthiness, credit standing, credit capacity, character and general reputation of a borrower.

  Credit Report
• refers to existing and future government (GFIs), government-owned and controlled corporations (GOCCs) primarilly engaged in lending activities.

  Government Lending Institutions
• refers to information/data concerning the poor credit performance of borrowers such as, but not limited to, defaults on loans, adverse court judgments relating torefers to information/data concerning the poor credit performance debts and reports on bankruptcy, insolvency, petitions or orders on suspension of payments and

  corporate rehabilitation

  Negative Credit Information