Dear PAO,

Do banks have an obligation to disclose not only the terms of a loan but also other aspects, such as the costs of pre-paying a loan? My brother, a fisherman, obtained a loan from a bank in our province. He only has a few months of amortizations left until he pays off his loan, so he is contemplating pre-paying his loan balance and has asked me if I can help him with it. But we were told by the bank employee that he would have to pay P25,000 if he pushed through with the pre-payment. This was not disclosed to him when he secured the loan. Isn’t it also that banks should not discriminate against anyone? We feel that, just because my brother is a fisherman, the bank employees are giving him a very difficult time and purposely withholding important information, such as the costs of pre-payment of loans.

Ester

Dear Ester,

We have a law that requires banks and other financial service providers to disclose all information concerning the financial product or service. This law is Republic Act (RA) 11765, otherwise known as the Financial Products and Services Consumer Protection Act. Section 8 (b) and (c) thereof expressly provides:

“Section 8. Duties and Responsibilities of Financial Service Providers. – x x x

“(a) Appropriate Product Design and Delivery. – Financial service providers shall continuously evaluate their financial products or services to ensure that they are appropriately targeted to the needs, understanding and capacity of both their markets and their clients. This shall include, among others, the following: x x x

“(3) Pre-payment of loans and other credit accommodations. – A borrower may, at any time prior to the agreed maturity date, prepay a loan or other credit transactions in whole or in part: Provided, That costs or fees charged to the borrower for such pre-payment, if any, shall be disclosed to ensure transparency, disclosure, and responsible pricing as required under this section.

“(b) Transparency, Disclosure, and responsible Pricing. – Financial service providers must ensure that they adopt disclosure principles in their communications and their contracts with financial consumers, including the use of clear and concise language to ensure that all information concerning the financial product or service is understood by the target clients. This shall also include updated and accurate disclosure of information such as pricing or any cost associated with the product or service and should be made in a consistent manner to facilitate a comparison between similar financial products or services across the industry. x x x”

Apart from the aforementioned obligation, banks and other financial service providers are likewise prohibited from discriminating against their clients. Section 8 (d) of RA 11765 states:

“(d) Fair and Respectful Treatment of Clients. – Financial service providers shall have the right to select their clients: Provided, That they shall not discriminate against clients on the basis of race, age, financial capacity, ethnicity, origin, gender, disability, health condition, sexual orientation, religious affiliation, or political affiliation: Provided, further, That financial service providers may provide distinction, as necessary, when making a risk assessment on a specific financial product or service.

“Financial Service providers are prohibited from employing abusive collection or debt recovery practices against their financial consumers.”

Accordingly, if the cost of the pre-payment was not disclosed to your brother when he obtained the loan with the bank or if it was not included in the contract of loan itself, then he should not be made liable to pay this undisclosed charge. Likewise, the bank employees and/or officers concerned may be held liable for such non-disclosure. The same holds true if you are able to establish that there was indeed discrimination against your brother. Section 15 of RA 11765 specifically provides:

“Section 15. Penalties. – Any persons who willfully violates this Act or the rules, regulations, orders, or instructions issued by the financial regulators to implement this Act, shall be punished by imprisonment of not less than one (1) year, but not more than five (5) years, or by a fine of not less than Fifty thousand pesos (P50,000.00) but not more than Two million pesos (P2,000,000.00), or both, at the discretion of the court: Provided, That if the violation is committed by a corporation or a juridical entity, the directors, officers, employees, or other officers who are directly responsible for such violation shall be held liable thereto.”

We hope that we were able to answer your queries. This advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to [email protected]