SEC EB Case No. 09-09-176 Christina S. Fabian Complainant-Appellee, versus Lloyd's Financing Corporation, Respondent-Appellant.

Securities and Exchange Commission Republic of the Philippines Department of Finance Pasay City, Philippines

Christina S. Fabian

Complainant-Appellee,

Versus SEC EB Case No. 09-09-176

Lloyd's Financing Corporation,

Respondent-Appellant.

DECISION

On 18 September 2009, Lloyd's Financing Corporation (Lloyd) filed an Appeall before the Commission En Banc assailing the Resolution dated 25 August 2009 issued by Director Justina F. Callangan of the Corporation Finance Department (CFD), (now Corporate Governance and Finance De- partment), the dispositive portion of which reads as follows:

In view of the Respondent's non-compliance with the require- ment of SEC Memorandum Circular No. 003, Series of 2001 for its fail- ure to fully and properly disclose the true cost of credit to the bor-

P20,000.00 plus daily penalty of P4,900.00 computed form May 13, rower, Lloyd's Finance Corporation is hereby assessed a basic fine of 2009 to July 2, 2009 computed at P100,00/day.2 Lloyd is directed to pay the same in cash or manager's check within five (5) days from receipt of the assessment. Lloyd is further directed to desist from defrauding its clients and to strictly comply with SEC Memo- randum Circular No. 003, Series of 2001(MC 3-01), which requires full disclosure of the true cost of credit to the borrower.3

CFD's Resolution arose from a complaint4 by Christina S. Fabian, seeking assistance regarding her loan application with Lloyd in the amount of P200,000.00 bearing 1% interest per month for a term of five years.5 The loan was evidenced by promissory note, and secured by a real estate mortgage.7 Fabian claimed that Lloyd failed to provide her an itemized list of deductions/charges on the loan despite several de- mands.8 She was made to pay P3,500.00 as processing fee and sign a

8 CFD Reso. (25 Aug. 2009) Anx. R. Anx. B. Anx.D. Anx. C. Anx. I& J. Notice of Appeal & Memo. of Appeal (18 Sept. 2009) Id.

SEC En Banc Case No. 09-09-076 Fabian v. Lloyd's Fin. Corp. Page 2 of 3 Decision

blank contract.9 In a conference held by CFD, Lloyd provided a receipt for P3,500, which represents a non-refundable processing fee.10 Lloyds fur- ther charges Fabian P15,651.84 for the expenses in the annotation of mortgage.11 Lloyd, also stated that it will not return the title of the mort- gaged property until Fabian pays for the expenses in the annotation and P3,036.20 as interests and penalty.12

Hence, CFD issued the assailed Resolution.

In its Memorandum of Appeal, Lloyd argues that Dir. Callangan erred in imposing the penalty because it did not violate MC 3-01. While admitting that the amount of P15,651.84 was inadvertently entered as taxes, the amount was spent as registration fees of the mortgage, pay- ment of real estate taxes and other miscellaneous expenses for the regis- tration of the mortgage.13 The amount of P3,500, was spent for appraisal of Fabian's property as need not be included in the disclosure statement because it was already paid in advance.14

The Appeal has no merit. The Commission in MC 3-01, requires that a Disclosure Statement on Loan/Credit Transaction be executed prior to the release of his loan:

In order to regulate the activities of financing and leasing com- panies and to place their operations on a sound, competitive and stable basis as well as to curtail or prevent acts or practices prejudicial to the public interest by a full disclosure of the true cost of credit to the bor- rower or user...15

Lloyd admitted that they inadvertently entered the 15,651.84 as taxes, although it was spent in relation to the processing of the real estate mortgage. This alone proves that the true cost of credit was not disclosed to Fabian, the borrower. The defense of inadvertence and good faith can- not be sustained, because the issuance did not contain any exceptions. Knowledge or intent is immaterial in this case.

As to the 3,500, the fact that it was paid in advance and was paid for her own benefit is not a defense. All charges, whether to be paid or are already paid, if it is in connection with the transaction, shall be included in the disclosure statement. Otherwise, the true cost of credit will not be

Q Anx. R. 1 1 13 14 5 Anx E. Anx. S. Appeal Memo. at 2-3. No. 003, series of 2001 (3 Mar. 2001). SEC, Disclosure Statement on Loan/Credit Transaction. Memorandum Circular Id. Id. at 3.

SEC En Banc Case No. 09-09-076 Fabian v. Lloyd's Fin. Corp. Page 3 of 3 Decision

reflected. Although it is not deductible from the loan, the fact that it was supposed to be paid, and in fact already advanced, by Fabian as pro- cessing fee renders such amount necessary to be stated in the disclosure statement. Such amount would not have been paid by Fabian, if it is not for the loan. Even if such payment was evidenced by a receipt, MC 3-01 requires such amounts to be included in the DSL and not on a separate receipt

WHEREFORE, premises considered, the instant Appeal is hereby DISMISSED for lack of merit.

SO ORDERED.

Pasay City, Philippines, 3 November 2017.

TERESITA J. HERBOSA a

Oatuaioa Naaun -lbe Chairperson 7AwA

ANTONIETA F. IBE EPHYRO LUIS B. AMATONG

Commissioner Commissioner

AMFSGV ERBO EMILIO B.AQUINO Commissioner Comphissioner