UCPB V.

SAMUEL AND BELUSO

(Finance Charges, R.A. No. 3765, Sec. 4. Sec. 6)
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Validity of the interest rates

The provision stating that the interest shall be at the rate indicative of DBD retail rate or as
determined by the Branch Head is indeed dependent solely on the will of petitioner
UCPB. Clearly, a rate as determined by the Branch Head gives the latter unfettered discretion
on what the rate may be. The Branch Head may choose any rate he or she desires. As regards the
rate indicative of the DBD retail rate, the same cannot be considered as valid for being akin to a
prevailing rate or prime rate allowed by this Court in Polotan. The interest rate
in Polotan reads:
The Cardholder agrees to pay interest per annum at 3% plus the prime rate of Security Bank and
Trust Company. x x x.

In this provision in Polotan, there is a fixed margin over the reference rate: 3%. Thus, the parties
can easily determine the interest rate by applying simple arithmetic. On the other hand, the
provision in the case at bar does not specify any margin above or below the DBD retail
rate. UCPB can peg the interest at any percentage above or below the DBD retail rate, again
giving it unfettered discretion in determining the interest rate.
Liability for Violation of Truth in Lending Act
RA 3765, otherwise known as the Truth in Lending Act.
Section 6(a) of the Truth in Lending Act which mandates the filing of an action to recover such
penalty must be made under the following circumstances:
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
charge required by such creditor in connection with such transaction, whichever is 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.
Rationale: to protect the public from hidden or undisclosed charges on their loan obligations,
requiring a full disclosure thereof by the lender.
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;

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.
Rationale: 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.
The promissory notes, the copies of which were presented to the spouses Beluso after execution,
are not sufficient notification from UCPB. As earlier discussed, the interest rate provision therein
does not sufficiently indicate with particularity the interest rate to be applied to the loan covered
by said promissory notes.