(NAR) VOL. 22 NO. 3, JULY - SEPTEMBER 2011
"§X305.5. Method of computing interest. Banks may only charge interest based on the outstanding balance of a loan at the beginning of an interest period.
For a loan where principal is payable in installments, interest per installment period shall be calculated based on the outstanding balance of the loan at the beginning of each installment period.
Towards this end, all loan-related documents shall show repayment schedules in a manner consistent with this provision. Marketing materials and presentations shall likewise be consistent with this provision."
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g. Finance charge includes interest, fees, service charges, discounts, and such other charges incident to the extension of credit.
h. Simple annual rate is the uniform percentage which represents the ratio between the finance charge and the amount to be financed under the assumption that the loan is payable in one year with single payment upon maturity and there are no up-front deductions to principal.
For loans with terms different from the above assumptions, the effective annual interest (EIR) rate shall be calculated and disclosed to the borrower as the relevant true cost of the loan comparable to the concept of simple annual rate.
For loans with contractual interest rates stated on monthly basis, the effective interest rate may be expressed as a monthly rate.
In accordance with the Philippine Accounting Standards (PAS) definition effective interest rate is the rate that exactly discounts estimated future cash flows through the life of the loan to the net amount of loan proceeds. For consistency, methodology and standards for discounted cash flow models shall be' prescribed to be used for the purpose."
"§X307.2 Information to be disclosed. As a general rule, loan terms shall be disclosed to all types of borrower. For small business/retail/consumer credit, the following are the minimum information to be disclosed (sample form in Appendix 19):
- The total amount to be financed;
- The finance charges expressed in terms of pesos and centavos;
- The net proceeds of the loan; and
- The percentage that the finance charge bears to the total amount to be financed expressed as a simple annual rate or an effective annual interest rate (EIR) as described in item h of Subsection X307.1. EIR may also be quoted as a monthly rate in parallel with the quotation of the contractual rate. Banks are required to furnish each borrower a copy of the disclosure statement, prior to the consummation of the transaction."
"§ X307.4 Posters. Banks shall post in conspicuous places in their principal place of business and branches, the information as contained in the revised format of disclosure statement (Appendix 19), with further enhancement through the Memorandum to All Banks to be issued for the purpose. The posters shall include an explicit notification that the disclosure statement is a required attachment to the loan contract and the customer has a right to demand a copy of such disclosure."