The Securities and Exchange Commission (SEC) has penalized lending firm Nittan Capital Finance Inc. (NCFI) for failing to completely disclose to borrowers its charges, interest rates, amortization, and other fees prior to the signing of a loan agreement.

In an order dated Feb. 13, the SEC’s financing and lending companies department (FLCD) found NCFI to have violated Republic Act (RA) No. 3765 or the Truth in Lending Act (TILA), in relation to SEC Memorandum Circular (MC) No. 7, series of 2011.

TILA requires creditors to disclose the true cost of credit, including interest and other charges, before a borrower signs a loan agreement, while MC 7 adopts the rules implementing TILA and imposes a graduated penalty framework for violations.

The company was directed to pay an administrative fine of ₱88,500, consisting of ₱20,000 for a first offense, plus ₱68,500 for 685 days of continued violation.

Additionally, the SEC ordered NCFI to review and revise its disclosure statement templates, amortization schedules, and loan information sheets to ensure strict compliance with TILA and MC 7.

Acting on a complaint, FLCD found multiple material deficiencies in NCFI’s disclosures to its borrower, including incomplete upfront charge and amortization disclosures.

The company was also found to have failed to inform the borrower about material conditional charges in the pre-consummation disclosure, taxes to be passed on to the borrower, as well as the effective interest rate.

“[D]isclosure must be furnished with sufficient clarity and lead time to allow the borrower to understand and evaluate the true cost of credit and to decide, in an informed manner, whether to proceed or refuse the transaction,” the order read.

It added that “[B]ased on substantial evidence on record, FLCD finds that [NCFI] failed to comply with the minimum statutory and regulatory disclosure requirements under TILA and MC 7, and is administratively liable therefor.”