Updated Rules Implementing the Truth in Lending Act

October 5, 2011

INSURANCE CIRCULAR LETTER NO. 031-11

 

Cognizant of the need to enhance loan transaction transparency, uphold consumer protection, as well as promote healthy competition and ensure a level playing field among credit providers, the following rules and regulations are hereby prescribed for loans and receivables granted by insurance companies and mutual benefit associations.

A. Method of Computing Interest on Loans & Receivables:

The amount of interest shall be charged only 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.

B. As defined under IC-CL Nos. 33 & 34-2006

1. Loans and Receivables represents non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than:

a. those that the company intends to sell immediately or in the near term, which shall be classified as held for trading, and those that the company upon initial recognition designates as fair value through profit or loss;

b. those that the company upon initial recognition designates as available for sale; or

c. those for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration, which shall be classified as available for sale. acCDSH

2. Loans and Receivables shall be comprised of the following sub-accounts:

a. Real Estate Mortgage Loans — This represents the outstanding balances of loans secured by first mortgage on real estate properties.

b. Collateral Loans — This represents the outstanding balances of loans granted to companies or individuals secured by pledges of shares of stock, bonds and/or other securities.

c. Guaranteed Loans — This represents the outstanding balances of loans granted to companies or individuals which are covered by guarantees from other entities or individuals.

d. Chattel Mortgage Loans — This represents the outstanding balances of loans secured by mortgage of chattels or personal properties.

e. Notes Receivable — This represents interest bearing loans granted by the company and evidenced by duly approved and notarized Promissory Notes.

f. Housing Loans — This represents outstanding balances of loans granted to employees secured by a mortgage covering their house and lot.

g. Car Loans — This represents outstanding balances of loans granted to employees secured by a mortgage covering their cars.

h. Low Cost Housing — This represents the outstanding of loans granted to employees and other selected non-group employees for low cost housing projects as approved and participated upon by government agencies.

i. Sale Contract Receivables — This represents the uncollected portion of the consideration on the sale of real estate owned by the company, whereby title to the property sold has been transferred to the buyer, and subject of a deed of sale with mortgage.

j. Other Loans Receivable — This represents all other loans which cannot be classified under any of the foregoing loan accounts.

3. Accounts receivable represents receivable from non-insurance transactions of the company. It may comprise of the following accounts:

a. Advances to Agents (Agents Accounts)/Employees — this represents advances to insurance agents and salary loans of officers and staff granted by the company to be liquidated thru regular deductions from commissions and salaries, respectively. DITEAc

b. Operating Lease Receivables — This represents the amount of rent receivables arising from operating lease contracts. Lease income should be recognized on a straight-line basis.

Please be guided accordingly.

 

(SGD.) EMMANUEL F. DOOCCommissionerInsurance Commission