DOJ Opinion No. 032, s. 1994

DOJ OPINION NO. 032 , s. 1994 March 10, 1994 Undersecretary Ernesto M. Ordoez Department of Trade and Industry Trade and Industry Building 361 Sen. Gil J. Puyat Avenue Makati, Metro Manila Sir : This refers to your request for "further classification on the applicability of laws and the jurisdiction of implementing agencies on consumer credit transaction in the light of" this Department's Opinion No. 69, series 1993. In particular, you pose the following queries: prcd "1. Which agency has jurisdiction over credit transactions involving the use of the credit cards and purchase orders and which are conducted in-house by banking and non-financing institutions like Uniwide, Rustan's, Cinderella and Shoemart? "2. May a storeowner be considered as engaged in 'financing' within the meaning of the Financing Company Act (R.A. No. 5980) in case of in-house credit transaction involving the use of credit card? "3. Is the use of credit card considered 'Receivable Financing' as defined under the Financing Company Act? "4. In the case where a deposit is required of a customer, will it constitute 'borrowing', thus within the regulatory supervision of Bangko Sentral?" "5. In case where a real estate mortgage in addition to cash deposit is required of a customer, will it be Bangko Sentral or the SEC that will regulate?" "6. Which agency has jurisdiction over the open-end credit transaction? Will it depend on the nature of the transaction and parties involved (i.e. bank, financing company or in-house)?" It appears that the Securities and Exchange Commission ("SEC" ), through its Associate Commissioner Merle O. Manuel, has opined that the Monetary Board of the Central Bank of the Philippines (now Bangko Sentral ng Pilipinas [BSP]) is the proper agency which would enforce the provisions on consumer credit transactions as stated in the abovestated opinion. However, the latter agency, through its director Candon B. Guerrero, has insisted that the BSP does not regulate, much less supervise and/or examine, credit card operations as a whole, unless conducted in-house by banks or through subsidiaries or affiliates of banks and quasi-banks, pursuant to Section 25 of R.A. No. 7653 (The New Central Bank Act). As we see it, the abovequoted queries boil down to the issue as to which government agency has regulatory jurisdiction over consumer credit transactions involving the use of credit cards or purchase orders. In its subject opinion, this Department has ruled that the provisions on the consumer credit transactions as found in the Consumer Act (R.A. 7394) should be enforced by the Monetary Board of the Central Bank. The reason is that in view of the failure of said statute to specify the 'implementing agency" in Title IV 9 (Consumer Credit Transaction) thereof, the provisions of the Truth in Lending Act (R.A. 3765) should apply suppletorily, both legislations being in pari materia ; in addition. it was noted that the Central Bank is tasked with administering the credit system of the country (Sec. 2, R.A. 265). It appears, however, that subsequent to the issuance of subject opinion, the Central Bank Act (R.A. 265) was superseded by the new Central Bank Act (R.A. 7653), which created the BSP. Examination of the latter's provisions discloses that the BSP is now charged simply with providing "policy directions in the areas of money, banking and credit (Sec. 3, R.A. 7653), unlike before, when the Central Bank was tasked "to administer the monetary, banking, and credit system" (Sec. 3, R.A. 265). More significantly, R.A. No. 7653 specifies that only those "powers, duties, and functions vested by law in the Central Bank of the Philippines not inconsistent with the provisions of this Act shall be deemed transferred to the Bangko Sentral ng Pilipinas " (Sec, 136). Close study of said act reveals that the old Central Bank's power to enforce the Truth in Lending Act may be reconciled with the BSP's function under R.A. 7653 only insofar as it concerns banks, finance companies and non-bank financial institutions performing quasi-banking functions and institutions performing the same functions. This is because this institutions are placed under the regulatory jurisdiction of the BSP (See Secs. 3 and 24, R.A. 7653). It is pertinent to add that the regulatory powers of the BSP over finance companies without quasi-banking functions shall be phased out in five (5) years, together with its fiscal agency functions for the government (see Secs. 129 and 13; Id .). This indicates Congressional intention to reduce the scope of the BSP's powers, functions and responsibilities. Based upon the foregoing, we now believe that the provisions on the consumer credit transactions under Consumer Act should be enforced by the BSP only insofar as they involve banking institutions, finance companies, quasi-banks and institutions performing similar functions. Hence, it follows that if these business entities engage in credit transactions involving the use of credit cards or purchase orders, such activities shall be covered by the regulatory authority of the BSP. However, if this transactions are undertaken at other business entities, such as department stores and supermarket chains, we are not prepared to say, for lack of clarity in the provisions of existing laws, as to which government agency shall have supervisory authority over them. And it is the context of this statutory uncertainty that pending the enactment of remedial legislations in this regard, the issue of regulatory jurisdiction over credit transactions involving the use of credit cards and purchase orders conducted by business organizations which are not banks, quasi-banks or similar institutions may be made the subject of ad hoc arrangements between the DTI and the SEC since the legally-mandated functions of these agencies approximate the aforesaid regulatory jurisdiction. Wherefore, Opinion No. 69, series 1993 of this Department is modified accordingly. Very truly yours, (SGD.) FRANKLIN M. DRILON Secretary