Educational process guidance for Philippine microfinance and small lending desks — not legal advice. Have your counsel confirm how each of your fees should be classified, and which regulator’s rules sit on top of RA 3765 for your license, before you change your forms.
A borrower signs the promissory note, gets the cash, and two weeks later calls the branch angry: “You said two percent a month. Why does my statement say I’m paying more?” Nothing on the file shows what they were told before signing. A loan disclosure statement prevents that call. It is one page, handed over before the loan is consummated, that shows the borrower in pesos and as an annual rate what the credit will actually cost.
The short answer: under the Truth in Lending Act (Republic Act No. 3765), a creditor must give the borrower a clear written statement before the transaction is consummated. Build that statement from the same loan amount, fees, and schedule your system already holds, have the borrower sign that they received it before release, store the signed PDF in the loan-file document vault, and block disbursement until that evidence is on file. Treat disclosure as a desk process with maker-checker on release — not as a blank form someone fills from memory.
This guide is for Philippine money-lender and small-MFI desk leads and branch managers. You will get the seven Section 4 items mapped to what the borrower must see in pesos, a worked example that shows why “2% a month” is not a clear annual finance-charge disclosure, a sign-off and release-gate checklist, a re-disclose / proceed / escalate decision framework, the traps desk staff hit, and where an LMS fits today without inventing a TILA module.
Who this is for (and who can skip)
Use this if you run a lending company, a small MFI, a cooperative credit desk, or a salary-loan operation where officers still fill in figures by hand or quote a “per month” rate at the counter.
You can skip it if your system already prints a disclosure from the same numbers that drive the amortization schedule, every release is blocked until a dated acknowledgment is in the vault, and you audit signed copies every month. In that case, jump to the traps section and check yourself against it.
The seven items Section 4 asks for
Section 4 of RA 3765 lists what the written statement must set out, “to the extent applicable,” and BSP consumer-protection practice expects the same clear, before-consummation written cost of credit. For a plain cash loan, some items (like a trade-in) will not apply, but your form should still have a place for each so nothing is skipped by accident.
| # | Item in the law | What the borrower must see in pesos (cash loan) |
|---|---|---|
| 1 | Cash price or delivered price | The loan amount applied for, in pesos |
| 2 | Down payment and/or trade-in | Usually ₱0.00 on a cash loan; state it anyway |
| 3 | Difference between 1 and 2 | The gross amount being lent |
| 4 | Itemized charges not incident to the extension of credit | Each such charge listed separately, never lumped |
| 5 | Total amount to be financed | What the borrower actually gets the use of (cash in hand after deductible fees) |
| 6 | Finance charge in pesos and centavos | Interest plus every fee that exists because credit was extended |
| 7 | Finance charge as a simple annual rate on the outstanding unpaid balance | The real yearly rate, not the headline monthly flat quote |
Item 7 is where most small desks get into trouble, because a flat “per month” quote looks far cheaper than the rate on the declining balance. Newer rules under the Financial Products and Services Consumer Protection Act (RA 11765) push the same direction: clear, fair dealing on cost. Treat the seven items as a baseline your counsel maps to your license, not a checkbox.
Worked peso example: why “2% a month” is not 24% a year
Illustrative numbers only — labeled so your desk can replay the math, not as a rate card. Take a ₱20,000 loan over six months. Interest is quoted as 2% per month, flat, on the original principal. A ₱500 processing fee is deducted at release.
| Line | Illustrative figure |
|---|---|
| Interest (₱20,000 × 2% × 6) | ₱2,400 |
| Processing fee (charged because credit was extended) | ₱500 |
| Finance charge (interest + fee) | ₱2,900 |
| Cash actually released | ₱19,500 |
| Total to repay / six monthly payments | ₱22,400 / about ₱3,733.33 each |
| Headline flat quote (“2% × 12”) | “24% a year” |
| Rate on the declining balance treating ₱19,500 as amount financed | About 4.11% per month ≈ 49.3% a year |
| Same math without the fee (₱20,000 financed) | Still about 40% a year |
The flat quote understates the cost by about half. That gap is exactly what the disclosure is meant to show. Ask your counsel which method and which fees your regulator expects, then let your system do the math so every officer prints the same figure. For how flat and diminishing interest behave on product setup, see flat, reducing, and interest-only loan products. Keep fee definitions once so the disclosure, note, and schedule stay aligned — see fee configuration patterns.
What the filled-in statement looks like
Here is the same illustrative ₱20,000 loan laid out the way a borrower should see it on one page.
| # | Line on the statement | Illustrative figure |
|---|---|---|
| 1 | Loan amount applied for | ₱20,000.00 |
| 2 | Down payment or trade-in | ₱0.00 (not applicable) |
| 3 | Difference between 1 and 2 | ₱20,000.00 |
| 4 | Charges not incident to the extension of credit | None in this example |
| 5 | Total amount to be financed | ₱19,500.00 (cash released after the ₱500 fee) |
| 6 | Finance charge | ₱2,900.00 (₱2,400 interest + ₱500 fee) |
| 7 | Finance charge as a simple annual rate | About 49.3% a year (about 4.11% a month) |
| + | Payment schedule | 6 × about ₱3,733.33; total of payments ₱22,400.00 |
Two lines do most of the work: the finance charge in pesos, and the annual rate. If either is blank, rounded to a friendlier number, or filled in by hand after the fact, the statement fails. Notice too that items 3 and 5 differ by exactly the processing fee — the borrower who sees ₱20,000 on the note but ₱19,500 in hand deserves to see why on paper before they sign.
Sign-off and release-gate checklist
Who signs, what evidence sits in the vault, and when release is blocked:
| Gate | Who | Evidence in vault / file | If missing |
|---|---|---|---|
| Figures locked | Officer prepares from loan record | Product, term, fees, amortization preview match disclosure totals | Do not print; fix the loan record first |
| Borrower acknowledgment | Borrower signs and dates; officer countersigns | Signed disclosure dated on or before release; borrower’s copy handed over | Release blocked |
| Vault upload | Cashier or docs clerk | Scan/PDF in the loan-file document vault, linked to the loan | Release blocked until uploaded |
| Maker-checker on disburse | Cashier releases; second person approves | Same dual control as maker-checker on disburse | Release blocked |
| Monthly sample audit | Branch manager | Ten random releases checked for dated signed statement before cash left | Escalate gaps; retrain; do not paper over |
Generate the disclosure from the loan record after product, term, and fees are locked — do not type it. If any figure changes, the old statement is void and a new one prints. Explain the two big numbers out loud before you ask for a signature.
Decision framework: re-disclose, proceed, or escalate
Officers need a rule they can apply without calling the manager every time. Write yours down. This is a practical baseline:
- Proceed to release when the disclosure was generated from the locked loan record, totals match the amortization schedule, items 1–7 are filled (N/A stated where needed), the borrower signed and dated before the note/cash, the scan is in the vault, and maker-checker on disburse is clear.
- Re-disclose (void the old page) when any locked figure changes before release — rate, fee, term, amount, or schedule — or when the printed page does not match the system, or the borrower asks for a corrected copy after spotting an error. Reprint, re-explain, re-sign, re-file. Never “pen-and-ink” a live disclosure.
- Escalate to counsel when fee classification is unclear (insurance, documentary stamp, capital build-up held back at release), when a third-party payer or special product sits outside your standard template, when a renewal or restructure needs a fresh statement and your policy is silent, or when a borrower disputes what they were told after release. Do not invent a classification at the counter.
Two officers in the same branch should never give the same borrower two different answers on whether a fee belongs in item 6.
Traps desk staff hit
- Quoting only the monthly flat rate. Fine to mention; item 7 still needs the annual rate on the unpaid balance.
- Hiding fees in “net proceeds.” If the fee exists because you lent money, it belongs in the finance charge and on its own line.
- Signing after release. The law says before consummation. A statement dated the day after cash left is evidence against you.
- Different numbers in different places. Disclosure, promissory note, schedule, and loan statement must agree — including maturity date versus last installment.
- No borrower copy. Give them one. It cuts “you never told me” calls.
- Blank item 2 or 4 “because N/A.” Write ₱0.00 or “not applicable” so the gap is intentional, not forgotten.
- Letting the booking officer also approve release without a second pair of eyes on the vault evidence.
What’s at stake
Section 6 of RA 3765 makes a creditor who fails to disclose liable to the borrower for ₱100 or twice the finance charge, whichever is greater, capped at ₱2,000 per transaction, plus attorney’s fees and costs. Willful violations carry a fine and possible imprisonment. The bigger cost for most desks is trust and complaints. Frame this as consumer-protection hygiene under RA 3765 and RA 11765 — educational process, not a substitute for counsel.
Where PesoLend fits today
PesoLend has no separate disclosure-statement module and no auto-TILA form. Disclosure remains a desk process you run beside the LMS. What you get today is the loan amount, fees, and repayment schedule in one record; an amortization preview before disburse; a loan statement the borrower can read against what they signed; the loan-file document vault to store the signed disclosure PDF; and staff roles and permissions with maker-checker on disburse so the person who prepared the page is not the only person who can release cash.
On PH loans, the Documents tab can generate Loan Agreement, Promissory Note, Statement of Account, and Demand Letter as print-ready drafts with a counsel disclaimer — and keeps earlier versions when you regenerate after a material schedule change. A Truth in Lending disclosure sheet is not among those live generators today. Build your one-page statement from the same loan record, have counsel approve the layout and fee classification, upload the signed copy to the vault, and block release until it is there.
Frequently asked questions
Do I need a new disclosure for a renewal or restructure?
Treat it as a new credit transaction and print a fresh statement with the new amount financed, finance charge, and rate. Confirm with your counsel for your specific product.
Can the disclosure be part of the promissory note?
Many lenders print it as a separate page so the borrower’s acknowledgment is clear and dated on its own. Whatever format you use, the seven items must be easy to find.
What if the borrower prepays?
The disclosure covers the original terms. For early payoff, give a written pre-termination quote so the borrower sees what they owe that day.
Which regulator’s rules apply on top of RA 3765?
It depends on your license. Banks and other BSP-supervised institutions follow BSP rules; lending and financing companies answer to the SEC; cooperatives to the CDA. Confirm with counsel which ones apply before you finalize the form.
What if the borrower is more comfortable in Filipino or a local language?
Explain the finance charge and the annual rate in the language the borrower understands, and note on the file who explained it and in what language. The point of the law is understanding, not just a signature.
Next step: pull five loans released last week and check each file for a signed statement dated before release, with the finance charge in pesos and an annual rate. If any are missing or the numbers don’t match the schedule, fix the form first, then the release gate. Existing teams can log in to PesoLend to match each disclosure to its schedule, loan statement, vault file, and maker-checker release.