Republic of the Philippines
HOUSE OF REPRESENTATIVES
‘Quezon City, Philippines

FIFTEENTH CONGRESS
Second Regular Session

Sv il

HOUSE BILL NO.

INTRODUCED BY: HON, MARCELINO “MARCY” R. TEODORO.

EXPLANATORY NOTE

There are a great number of consumers engaged in rental-purchase
transactions. Unfortunately in many instances, these transactions have taken place,
without adequate disclosures and other protections to consumers who most of the time
tums out to become victims of unprincipted businessmen.

This measure seeks to assure meaningful disclosures of the terms of rental-
purchase agreement, which includes disclosure of all costs under an agreement, as
weil as providing an enumeration of substantive rights available to consumers.

The proposed bill is in keeping with the policy enshrined in the 1987 Constitution,
Article 2, Section 5 which declares:
“The maintenance of peace and order, the protection of life, liberty and property, and

the promotion of the general welfare. are essential for the enjoyment by all the people
of the blessings of democracy."

In view of the foregoing, immediate passage of this bill is hereby sought.

Koocrna “MARCY” R. TEODORO.

Representative, 1st District
City of Marikina


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Philippines

FIFTEENTH CONGRESS
Second Regular Session

HOUSE BILL NO.__57' 41

INTRODUCED BY: HON. MARCELINO “MARCY” R. TEODORO

AN ACT
TO ASSURE MEANINGFUL DISCLOSURES OF THE TERMS OF RENTAL
PURCHASE AGREEMENT, INCLUDING DISCLOSURES OF ALL COSTS TO
CONSUMERS UNDER SUCH AGREEMENT AND TO PROVIDE CERTAIN
SUBSTANTIVE RIGHTS TO CONSUMERS UNDER SUCH AGREEMENTS.

Be it enacted by the Senate and House and Representatives of the Philippines
in Congress assembled:

SECTION 1. Short Title. - This Act shall be known as the “Consumer Disciosure
and Rental Purchase Agreement Act.”

SECTION 2. Purpose. - The purpose of this Act are:

(A) To assure meaningful disclosure of the terms of the terms of rental-purchase
agreement, including disclosure of ali costs te consumers under such agreements, and

(8) To provide certain substantive rights to consumers who enter into rent-
purchase agreements.

SECTION 3. Definition. - For purposes of this Act.

(A) The term “advertisement” means a commercial message in any medium that
promotes, directly, a rental-purchase agreement but does not include price tags,
window signs, or other in-store merchandising aids.

(B) The term “agricultural purpose” includes:

1. the production, harvest, exhibition, marketing, transformation, processing, or
manufacture of agricultural products by a natural person who cultivates plants or
propagates or nurtures agricultural products; and

2. the acquisition of farmlands, real property with a form residence, or personal
property and service used primarily in farming,

{C) The term “consumer” means a natural person who is offered or enters into a
rental purchase agreement.

{D) The term “date of consummation* means the date on which a consumer
becomes contractually obligated under a rental-purchase agreement.

(E) The term “merchant* means a person who provides the use of property
through a rental-purchase agreement in the ordinary course of business and to whom a
consumer’ initial obligation under the agreement in payable.


{F) The term “rental-purchase agreement" means a contract between consumer
and a merchant~

1, under which the merchant agrees to provide the consumer the use of the
personal property for an initial period of four (4) months or less;

2. that is automatically renewable with each payment by the consumer; and

3. that permits but does not obligate the consumer to become the owner of the
Property .

SECTION 4. Exempted Transaction. - This Act does not apply to rental-
purchase agreement primarily for business, commercial , or agricultural purpose, or
whose made with Goverment agencies or instrumentalities.

SECTION 5. General Disclosure Requirements -

(A) IN GENERAL - The merchant under a rental -purchase agreement shail
disclose to consumer under the agreement the information by Section 6,7, and 8. In an
agreement involving more than 1 merchant, only 1 merchant is required to make the
disclosures.

(B) DISCLOSURE — The disclosure required 6 and 7 and the agreement
Provision required to be included under section 8 shall be made or included—~

1. at or before the date of consummation of the rental -purchase agreement;

2. clearly and conspicuously in writing and in a form that the consumer may keep:
and

3. in case of disclosures required under Section 6, segregated from all other term,
data, or information provided to the consumer.

(C) INACCURACY - If a disclosure required to be made by a merchant to a
consumer under section 6 becomes inaccurate as the result of any mutual written
agreement between the merchant and such consumer occurring after delivery of the
required disclosure to such consumer under this title , the resulting inaccuracy is not a
violation of this Title.

SECTION 6. Rental- Purchase Agreement Disclosures. - For each rental -
purchase agreement, the merchant shall disclose to the consumer, to the extent
applicable, under the agreement the following:

(A) The amount of the first payment and the total amount of fees, taxes.
or other charges which may be required at or before the date of consummation of
the agreement;

(B) The amount and timing of rental payment;

(C) The total number and total amount of rental payment —_ necessary to
acquire ownership of the property ;

{D) A statement that the consumer will not own the property until the
consumer has paid the total amount necessary to acquired ownership;

(E) A disclosure, to the extent applicable, that the total dollar amount of
payment does not include other fees or charges, such asa delivery fee, an initial
processing fee, taxes, or other fees or charges which may be payable under the
agreement. Such fees and charges shall be separately identified in the
agreement;

(F) A statement that the consumer may be responsible for the fair market


value of the property if it is lost, stolen, de: 1age, or destroyed;

(G) A statement indicating whether the property is now new or usec,
except a statement indicating that new property is not a violation of this Title;

(H) A statement of --

(1) The manufacturer's suggested retail price, where applicable; or
{2} The price for which the property is available from the
merchant in a cash sale

(l) A clear statement of the terms of the consumer's opte to
acquire ownership;

(J) A statements-

1. Identifying the party responsibie for maintaining or servicing the sroperty
while it is being rented;
2. Describing the responsibility for maintenance or service; and
3. Disclosing that if any part of a manufacturer's express warranty covers the
Property at the time the consumer acquires ownership of the property, the
warranty will be transferred to the consumer if allowed by the ti-rmrs of the
warranty

(K) The date of consummation of the transaction and the ident
merchant and consumer;

(L) Late fees for past due rental charges.
SECTION 7. Point of Rental Disclosures.-

(A) IN GENERAL — Except as provided in subsection (B) , each item of property
or each set of items, if offered as a set or displayed or offered in connection with a
rental-purchase agreements, shall have displayed on or next to it a card, tag or label
that clearly and conspicuously discloses only of the following:

(1) A brief description of the property;

(2) Whether the property is new or used:

(3) The cash price of the property;

(4) The amount of each rental payment;

{5} The total number of rental payments necessary to acquire ownership of the
property;

(6) The total amount of rental payments necessary to acquire ownership of the
property;

(B) EXCEPTION — A merchant may make the disclosure require by subsection
(1) in the form of a list or catalogue which is readily available to the customer # the
merchandise is not displayed in the merchant's showroom or if displaying a tag vould
be impractical due to the size of the merchandise.

SECTION 8. Agreement Provisions. -
(A) IN GENERAL - Each rental-purchase agreements shall -
{1} Provide a statement of any obtigation of the consumer and the merchant under

the agreement to repair any defect or malfunction of the property covered by the
agreements, any limitation of those obtigations;


(2) Provide that the consumer may terminate the agreements without penalty by
voluntarily surrendering or returning the property covered by the agreement upon
expiration of any term; and

(3) Contain a provision for reinstatement of the agreement, which at a minimum -

(a) permits a consumer who fails to make a timely rental renewal payment to
reinstate the agreement, without losing any rights or option which exist under the
agreement, by the payment of ali past due charges and any late fee and payment
for the next rental term within seven (7) business days after the renewal date if
the consumers pays monthly , or within three (3) business days after the renewal
date if the consumer pays more frequently than monthly;

(b) if the consumer returns or voluntarily surrenders the property covered by the
agreement, other than through judicial process, during the app‘ cable
reinstatement period set forth in subparagraph (1), permits he consumer to
reinstate the agreement during a period of at least thirty (30) days after the date
of the return or surrender of the property by the payment of all past due rental
charges, and any applicable redelivery, repair , or late fees and a payments for
the next rental; and

(c) if the consumer has paid sixty percent (60%) or more of the total amount of
Payments necessary to acquire ownership of the property, other than due to
judicial process, during the applicable reinstatement period set forth in paragraph
(1), permits the consumer to reinstate the agreement during a period of at least
nine (9) days after the date of the return of the property by the payments of all
past due rental charges and any applicable redelivery, repair, or late fees and a
Payment for the next rental term.

(B) CONSTRUCTION - Subsection (A) shal! not be construed to prevent a
merchant from attempting to repossess property during the reinstatement ceriod
pursuant to subsection (A)(3)(a), but such a repossession does not affect the
consumer's right to reinstate. Upon reinstatement, the merchant shall provide the
consumer with the same property, if available; if it is not available the merchan! shall
substitute property of comparable quality and condition.

SECTION 9. Prohibited Inclusion. - A rental-purchase agreement may not
contain-(A) a confession of judgment;

(A) A confession of judgment;
(B) A negotiable instrument;

(C) A security interest or any other claim of property interest in any goods, except
those goods the use of which is provided by the merchant pursuant to the agreements:

(D) A wage assignment; or
(E) A waiver by the consumer of a claim or defense.

SECTION 10. Statements of Accounts. - A merchent shail be required upon
request by the consumer to provide a quarterly statement.

SECTION 11. Renegotiations and Extensions. - A renegotiations of the rental-
purchase agreement is deemed to be a new agreements for purposes of this Act,
requiring new disclosures under Section 6. A renegotiation shail be considered to occur
when an existing rental purchase agreement is satisfied and replaced by a new
agreement undertaken by the same merchant. Events such as the following shall not be
treated as renegotiations

(A) The addition or return of property in a multiple-item agreement or the


substitution of property, if in either case the average payment allocable to a payment
peried is not changed by more than twenty-five percent (25%).

(B) A deferral or extension of one or more periodic payments, or portions of a
periodic payments.

(C ) A reduction in changes in the agreement.
(D) An agreement involving a court proceeding.
(E) Any other event described in regulations prescribed by the Board.
SECTION 12. Rental- Purchase Advertising.-

(A) ADVERTISEMENTS - If an advertisement refers to or states the amount of
any payment and the right to acquire ownership for any specific item, the merchant that
makes the advertisement shall also clearly and conspicuously state in the
advertisement the following items:

(1) The transaction advertised Is a rental-purchase agreement;

(2) The Total number and total amount of rental payments necessary to acquire
ownership under the agreement; and

(3) The consumer acquires no ownership is not paid.

(B) LIABILITY - The owner or personnel of any medium in which an
advertisement appears or through which it is disseminated shail not be liable for a
violation of subsection (A).

(C) CONSTRUCTION — Subsection (A) does not apply to an advertisement
which -

1. is published in the yellow pages of a telephone directory or in any similar
directory of business, or
2. is displayed in the merchant's place of business.

SECTION 13, Civil Liability. -

(A) LIABILITY AMOUNT — Except as otherwise provided in this Act, a merchant
who willfully violates this Act with respect to the consumer is liable to the consumer in
an amount equal to the following

(1) tn an action by an individual consumer, the sum of -

(a) actual damages sustained by the consumer as a result of the violation;
and
(b) not fess than Five thousand Pesos (P5,000.00).

(B) STATUTE OF LIMITATIONS ~

1. ACTIONS — An action may be brought in a court of competent jurisdiction at any
time but not later than one year of the date of the occurence of the violation.

2. CONSTRUCTION — This subsection does not bar a consumers from assesting a
violation of this title in an action to collect a debt brought more than one year
afer the date of the occurrence of the violation as a matter of defense by
recoupment or set off, except otherwise provided by law.

(C ) OFFSET -


1. LIMITATION — A consumer may not take any action to offset any amount for
which a merchant is potentially liable under subsection (1) against any amount
owed by the consumer, unless the amount of the merchant's liability has been
determined by judgment of a court of competent jurisdiction in action which the
merchant was a party.

2. CONSTRUCTION -— This subsection does not bar a consumer who is in default
on the obligation from asserting a violation of this Act as an original action, or as
defense of counterclaim to an action brought by the merchant to collect amounts
owed by the consumer.

SECTION 14. Defenses. - A merchant is not liable -

(A) Under Section 13 for a violation of the requirements of Section 6 if within
fifteen (15) days after first having knowledge of the violation, and before an action under
Section 13 is filed or written notice of the violation and makes whatever adjustments is
in the account are necessary that the consumer will not be required to pay an amount in
excess of the amounts actually disclosed;

(B) Under this Act for a violation if the merchant establishes, and at the tne of
the violation is implementing, procedures reasonably calculated to provided the
violation

SECTION 15. Liability of Assignees. -

(A) ASSIGNEES — For purposes of Section 13 and 14 and this Section, the term
"merchant" includes an assignee of a merchant. However, an action under Section 13
for a violation of this Act may be brought against an assignee only if the violation is
apparent on the face of the rental-purchase agreements to which it relates. A viclation
apparent in the face of a rental- purchase agreement includes a disclosure that can be
determined to be incomplete or inaccurate from the face of the agreement. An assignee
has no liability in a case in which the assignment is involuntary.

(B) CONSUMER ACKNOWLEDGEMENT ~ in any action by or against an
assignee, the consumer's written acknowledgment of receipt of a disclosure shali be
conclusive proof that the disclosure was made, if the assignee had no knowledce that
the disclosure had not been made when the assignee acquired the rental-purchase
agreements to which it relates.

SECTION 16. Regulation and Enforcement.-

{A) IN GENERAL — The Secretary of Trade and Industry shall issue regulations
to carry out the purposes of this Act, to prevent its circumvention, and to facilitate
compliance with its requirements. The regulations may contain classification and
differentiations and may provide for adjustments and exceptions for any class of
transaction.

(B} MODELS — The department shail publish mode! disclosure forms and clauses
to facilitate compliance with the disclosure requirements of this Act and to aid
consumers in understanding transaction under rental-purchase agreements. in
designing forms, the department shall consider the use by merchants of data
processing of similar automated equipment. Uses of the models shall be option, A
merchant who property uses the mode! disclosure forms shall be deemed to be in
compliance with the disclosure requirements.

(C) EFFECTIVE DATE OF REGULATIONS - Any regulations issued, or any


amendment or interpretation thereof, shall not be effective before the October 1 that
follows the date of promulgation by a teast six (6) months. The Secretary may at its
discretion lengthen that period of time to permit merchants to adjust their forms to
accommodation new requirements. The Secretary may also shorten than period of
time, notwithstanding the first sentence, if it makes a specific finding that such action is
necessary to comply with the findings of a court or to prevent unfair or deceptive
practices. In any case, merchants may comply with any newly promulgated disclosure
requirements prior to Its effective date.

(0) ENFORCEMENT — The Department shall enforcement the require ent of
this Act. The authority of Section 10 shall apply with respect to the enforcement cf such
requirements

SECTION 17. Effect on Government Agencies, - No civil liability or criminal
penalty under this Act may be imposed on the government or any of its department or
agencies, or political subdivision.

SECTION 18. Separability Clause. - If any provision or part hereof, so held
invalid or unconstitutional, the remainder of the law or the provision not otherwise
affected shall remain valid and subsisting.

SECTION 19. Repealing Clause. — All laws, rules and regulations inconsistent
with this Act are hereby repealed or modified accordingly.

SECTION 20. Effectivity Clause. - This Act shall take effect fifteen (15) days
after its publication in at least two (2) newspapers of general circulation.

Approved,