Article 167Supplement v1, p. 167

COMMERCIAL LAWS SUPPLEMENT

the net income of the Associations shall be exempt from

income tax.

Section 6. Prohibition against inquiry into or disclosure

of deposits . – All deposits of whatever nature with an

Association in the Philippines are hereby considered as of

an

absolutely

confidential

nature

and

may

not

be

examined,

inquired

or

looked

into

by

any

person,

government official, bureau or office, except upon written

permission of the depositor, or in cases of impeachment,

or upon order of a competent court in cases of bribery or

dereliction of duty of public officials, or in cases where the

money deposited or invested is the subject matter of

litigation.

It shall be unlawful for any official or employee of an

Association to disclose to any person any information

concerning said deposits, except in the cases mentioned

in the preceding paragraph of this Sec.. Any official or

employee of an Association who violates this Sec. shall be

punished under Republic Act No. 1405, as amended.

Section 7. Powers of Associations . – The Association

shall accept deposits from and grant loans only to its

members, subject to such rules and regulations as the

Monetary Board may promulgate to ensure sound, stable

and efficient operation: Provided, That no deposits shall

be sourced or deducted from the loans granted to a

member without his or her written consent.

The loans shall not exceed the members' deposits and

contributions in the Association, plus twelve (12) months

of his regular salary as the Association may allow or

seventy percent (70%) of the fair market value of any

property acceptable as collateral on first mortgage that

he may offer as security: Provided, That no loan shall have

the maturity date of more than five (5) years, except loans

on the security of unencumbered real estate for the

purpose

of

home

building and home development,

which may be granted with maturities not exceeding

twenty-five (25) years, and medium and long-term loans

to finance agricultural projects, subject to regulations

prescribed by the Monetary Board: Provided, further , That

the

treasurer,

cashier,

or

paymaster

of

the

office

employing a member is required, notwithstanding the

provision of any existing law, rule and regulation to the

contrary, to make deductions from his salary, wage,

income or retirement pension pursuant to the terms of

his loan, and all other deductions authorized by the

member, to remit such deductions to the Association

concerned, and to collect such reasonable fee for his

services as may be authorized by rules promulgated by

the Monetary Board.

In addition to the powers granted it by this Act and

existing laws, any Association may:

a) charge reasonable interest and collect such necessary

fees and charges incidental to the grant of loans;

b)

invest

its

funds

in

any

sound

non-speculative

enterprises as well as in bonds, security, and other

obligations issued by the Government of the Philippines,

or any of its political subdivisions, instrumentalities, or

corporations including government-owned or -controlled

corporations, subject to the rules and regulations of the

Monetary Board;

c) allow members to participate in the profits of the

Association;

d) borrow money or incur such obligations not exceeding

twenty

percent

(20%)

of

the

total

assets

of

the

Association, from any lending institution. The Monetary

Board, may, in meritorious cases, raise the ceiling on the

borrowing capacity of an Association to an amount not

exceeding thirty percent (30%) of its total assets: Provided,

That any such Association organized by employees of an

entity or corporation may borrow funds from said entity

or corporation but not vice-versa: Provided, further , That

the number of the Association's creditors shall not exceed

nineteen (19) at any one time;

e) maintain deposits with banks: Provided, That the

amount of such deposits shall be subject to the loan limit

to a single borrower as prescribed herein or by other

special laws or regulations;

f) require the employer-entity or corporation to provide it

with adequate office space within which it can conduct

its business; and

g) engage in death benefit program meant exclusively for

the mutual benefit of its members.

Section

8.

Restrictions

on

Associations .

–

a)

No

Association shall have or carry upon its books for any

person any demand, commercial or checking account, or

any credit to be withdrawn upon the presentation of any

negotiable check or draft.

b) No Association shall advertise or represent itself to the

public as a bank.

c) No Association shall issue, publish or cause or permit to

be issued or published, any advertisement that it is doing

or permitted to do any business which is prohibited by

law for an Association.

Section 9. Service units . – An Association shall open,

maintain and operate service units as may be necessary

in order to deliver services to its members subject to

approval of the Monetary Board.

Section 10. Agents and salesmen . – No person shall act

as an agent or sales representative of an Association or

operate an agency without obtaining a license from the

Monetary Board. No license is required for a collector of

an Association but no person shall hold himself out or act

as collector unless he is authorized as a collector in

writing by such Association.

Section 11. Merger or consolidation of Associations . – To

achieve

simplicity,

economy

and

efficiency,

different

associations of one company or department or office may

merge or consolidate upon approval of the Monetary

Board.

Section 12. Trustees . – Only members are eligible as

trustees of an Association: Provided, That in the case of a

merger or consolidation of Associations duly approved by

the Monetary Board, the limitation on the maximum

number of trustees in a corporation, as provided for in the

Corporation Code, shall not be applied for a maximum

period of three (3) years so that membership in the new

board may include up to the total number of trustees

provided for in the respective articles of incorporation of

the merging or consolidating Associations.

Section 13. Bond of officers and employees . – All officers

and employees of an Association who, in the regular

discharge

of

their

duties have access to money or

negotiable securities shall, before entering upon such

duties, furnish to the employing Association a good and

sufficient bond, the form and amount of which shall be

prescribed by the Monetary Board, and providing for

indemnity to the Association against the loss of money or

securities, by reason of their dishonesty.

Section 14. Compensation of trustees, officers and

employees . – No trustee, officer, or employee of an

Association shall receive from such Association, and no

Association shall pay to any trustee, officer, or employee

of

such

Association,

any

commission,

emolument,

gratuity or reward based on the volume or number of

loans made, or based on the interest or fees collected

thereon. Nothing in this Sec. prohibits or limits any of the

following:

a) receipt or payment of salaries of trustees, officers and

employees;

b) receipt of payment of commissions to agents whether

or not based on the volume or number of loans or on the

interest or fees collected thereon; and

c) receipt or payment of bonuses to trustees, officers or

employees if such bonuses are based on the performance

and not on the volume or number of loans made or on

the interest or fees collected thereon.

© Compiled by RGL

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