INSURANCE CODE 2 .

Insura nce a s an a lea tory contra ct

Insura nce in th e Philippine s is g ov erned b y the Insura nce Cod e, a s amend ed (R.A. By a n a lea tory contract, one of the pa rties or b oth reciproca lly bind themselves
1060 7, “ Insura nce Code ” ). The Insurance Commission is the body tha t to g ive or to d o something in consid era tion of w hat the other sh all give or d o
promulg ates the rules and regulations g overning insu rance and reinsurance. u pon the ha ppe ning of an event wh ich is uncerta in, or wh ich is to occu r a t an
ind etermina te time .

CON CEPT OF IN SURAN CE 3. Insurance as an Ube rrimae Fides contra ct

” It require s the pa rties to the contra ct to communica te th at wh ich a pa rty
Contra ct of insu ra nce k nows a nd ou ght to communicate, tha t is, the d uty to d isclose in g ood f aith a ll
It is an a g reeme nt w here by one und ertake s for a consid era tion to ind emnify f acts material to the contra ct. This doctrine is es sentia l on account of the
a nother a ga inst the loss, d ama ge or lia bility arising from an unknow n or f act th at the f ull circumstances of th e su bject ma tter of insura nce a re, a s a
conting ent event. rule, known to the insure d only a nd th e insu rer, in decid ing wh ethe r or not to
A contract of insura nce, to b e bind ing from the d ate of applica tion, must ha ve a ccept a risk, must rely prima rily upon th e information supplied to him by the
bee n a completed contract (Pere z vs. CA, GR N o. 112329, Ja nuary 28, 200 0). a pplicant (Su nd ia ng Sr. & Aquino, 2 014). “
Thus , it mus t hav e a ll the esse ntia l elements of a v alid contract a s e nu mera ted
E LE ME NTS O F AN INSUR ANCE CO NTR ACT
in Art. 1318 of the Ne w Civil Cod e:
1. Scheme to distribute losse s – Such as sumption of ris k is part of a g enera l
s ch eme to d istribute actu al losses among a la rg e grou p or substantial number
1. Subject matter in which th e insu red ha s an ins ura ble interest;
of persons bea ring a similar risk.
2. Consideration, w hich is the premium paid by the insured, for th e insu rer’ s
2 . Pa yment of premium – As consid eration for the insurer’ s promise, the
promise to inde mnif y the former upon the ha ppening of the ev ent or peril
ins ured ma kes a ra ta ble contrib ution ca lle d “ premium,” to a ge ne ra l insurance
insured a ga inst; a nd
f und.
3. Meeting of mind s of the pa rties. "Section 77. An insu rer is entitled to pa yment of the premiu m as
partie s. s oon as the thing insure d is e xposed to the peril insu red a ga inst.
“ Doing a n insurance busines s” or “ transa cting a n insurance busines s” N otw iths ta nd ing a ny a g reement to the contrary, no policy or contra ct of
ins ura nce issu ed by a n insurance compa ny is va lid a nd binding u nless and until
The te rm “ d oing an insura nce b usiness” or “ tra nsacting an insura nce the premium th ereof ha s be en paid, except in the cas e of a life or an ind ustria l
bus iness” me ans: life policy w henever the grace period provision a pplies, or w heneve r u nd er the
b roker a nd a g ency a g reements w ith d uly licensed interme dia rie s, a nine ty (90)-
1. Ma king or proposing to ma ke, as Insure r, any insurance contra ct; d a y credit exte nsion is giv en. N o cred it ex tension to a d uly lice ns ed
2. Making or proposing to make , a s Surety, any contra ct of suretyship as a interme dia ry sh ou ld exceed nine ty (90) d ays from d ate of issua nce of the policy.
vocation a nd not a s me rely incid enta l to a ny other legitima te busines s or ”
a ctivity of the sure ty;
3. Ass umption of Risk – R isk is a n element of a n insurance contra ct tha t the
3. Doing a ny k ind of bus iness, including a Reinsurance busines s, spe cifically
ins ured is sub je ct to a risk of loss by the ha ppening of a d esig nated peril. ”
re cog nized as constituting the doing of an insura nce bu siness within the
Any conting ent or u nknow n eve nt, whether pas t or fu ture, which may d amnify a
mea ning of th e Insurance Cod e (IC);
person ha ving a n insurable intere st, or crea te lia bility ag ains t him.”
4. Doing or proposing to do Any bu siness in su bsta nce equivalent to a ny of the
fore going in a ma nner de signed to ev ad e the provisions of the Insu ra nce Code.
4. R isk of Loss- “ The insure d is su bject to a risk of loss th roug h the
N ATURE AND CHAR ACTE RISTICS OF IN SURAN CE CON TRACTS d estruction or impairment of that intere st by th e ha ppening of
d esig nated peril.”
1. Insura nce a s contra cts of ad hes ion (Fine Print Ru le)
N OTE : Beca use of the first e lement, a n insurance contra ct therefore is a
“ A contract of ad hesion is one wherein a pa rty, usu ally a corporation,
risk-d istributing de vice.
prepa res the s tipula tions in the contra ct, while the other pa rty merely a ffixe s
his sig nature or his "a dh esion" th ereto. Through th e yea rs, th e courts hav e 5. Ins ura ble Interest- The insure d posse sses an interest of s ome kind
held tha t in these type of contra cts, th e pa rties do not ba rg ain on equa l s usceptib le of pecuniary estimation, known as “ insurable interes t.”
footing , the wea ker pa rty’ s pa rticipation being red uced to the a lternative
IN SURABL E INTE RE ST IN LIF E INSUR ANCE
to ta ke it or leav e it. Thu s, thes e contracts a re view ed as traps for the
“ SE C. 10. E very pe rson h as an insura ble inte rest in the lif e a nd hea lth:
wea ker pa rty w hom the courts of justice mu st protect. Consequently, a ny
(a ) Of himself , of his spou se a nd of h is children;
a mb igu ity there in is re solved a ga inst th e insu rer, or cons tru ed
(b) O f a ny person on whom he d epends wholly or in part for e duca tion or
lib era lly in f avor of the insured.”
s upport, or in wh om he has a pecunia ry interest;
HO WEV ER, if th e terms of contra ct are clea r, there is no room f or (c) Of a ny person und er a leg al oblig ation to him for the payment of money, or
inte rpre ta tion a nd the courts are bound to a dhe re to the insurance contract respecting prope rty or se rvices, of which de ath or illnes s mig ht d elay or pre vent
a lthoug h the contra ct may be rather onerous. Cou rts cannot mak e a new the performa nce; and
contra ct for the partie s wh ere th ey the mselves ha ve employed cle ar a nd “ (d ) Of any pers on upon whose lif e a ny esta te or interest ve sted in him
una mbigu ou s. d epend s.”
IN SURABLE IN TER EST IN PR OPER TY IN SURAN CE
“ SEC. 13. E very interest in property, whether re al or pe rsonal, or any rela tion PE RF E CTIO N OF AN IN SURAN CE CON TRACT
th ereto, or liability in respect thereof, of such nature th at a contempla ted pe ril Th e contract of ins ura nce is perfe cted wh en the asse nt or consent is
mig ht directly da mnify the insured , is a n insurable interes t.” ma nifested by the me eting of th e offer a nd the a cce ptance upon the thing
a nd th e ca use which are to constitute the contra ct. Me re of fer or proposa l is
DIF FE RE N CES IN IN SURABLE IN TE RE ST IN LIFE AND PROPE RTY not contempla ted (De Lim v. Sun Life Assurance Co., G.R. N o. L -15774,
Insura ble interest in life exists when the re is rea sona ble g round founde d on th e N ovembe r 2 9, 1920 ).
re lation of the partie s, e ithe r pe cu niary or contractual or by blood or affinity,
to expect some benefit or a dva nta ge from the continua nce of the life of the CO GNITION TH EO RY
insured. Me re submiss ion of the applica tion w ith ou t the corre spond ing approva l of the
policy d oes not re sult in the perfe ction of the contract of insu ra nce.
On the othe r hand , e very intere st in property, w hether rea l or personal, or any Insurance contra cts through corre spond ence f ollow the “ cog nition the ory”
re lation there to, or liability in res pe ct thereof, of such nature th at a w here in a n a cceptance mad e b y letter sha ll not b ind the person making the
contempla ted peril might d irectly d amnify the insure d offe r except from the time it ca me to his knowled g e (E nriquez v . Sun Life
As sura nce Co., GR N o. L-15774, N ov. 2 9, 1920 ).
CHAR ACTE RISTICS OF AN IN SURAN CE CON TRACT

1. CON SE N SUAL - It is pe rfected by the me eting of the mind s of the partie s PO LICY O F THE IN SURAN CE
a s to th e object, ca use and conside ra tion of th e insu ra nce contra ct. There It is th e w ritten instrument in w hich the contra ct of insurance is s et forth (IC,
should be a ccepta nce of the applica tion of the ins ura nce . Sec. 49). It is the written d ocu ment embodying th e terms and stipula tions of
2. VOLUN TARY - As a rule, th e pa rties ma y incorpora te such terms a nd the contra ct of insurance betw een the insured and insu rer.
conditions a s they ma y dee m conv enient: Provid ed they do not contrav ene a ny Th e policy is not ne ce ssary for the perfe ction of the contract (Sund iang Sr. &
provis ion of la w and a re not opposed to g ood customs, pu blic order, or pub lic Aquino, 20 14). Howe ver, the law provid es tha t no policy of insu ra nce sha ll be
policy. issued or d elivered unles s in the form previou sly approv ed by th e Insurance
E XCEPTIO NS: Commission
A. F or motor vehicle s;
BASIC CON TE NTS O F A POL ICY :
B. As a cond ition to granting a license to cond uct business or calling a ffecting
Pa rties
th e pub lic sa fety or w elfa re;
Pe riod d uring wh ich the insura nce is to
C. F or employees ;
continu e
D. Socia l insu ra nce for members of the GSIS a nd for employee s of the priv ate
Prope rty or lif e insu red
sector covered by the SSS.
Amount of insura nce, e xcept in open or running
3. UN ILATE RAL – It imposes leg al d utie s only on the insure r w ho promise s to
policie s
ind emnify the insured . It is executed as to th e insu red a fte r pa yment of the
Interes t of th e insu red in the property if he is
premium, a nd executory on the pa rt of th e insu rer in the sense tha t it is not
not the a bsolute ow ner
exe cu ted u ntil payme nt f or a loss .
R isk insured ag ainst
4. CON DITION AL – It is subject to cond itions the principa l one of w hich is the
R ate of premiu m (IC, Sec. 51)
ha ppe ning of th e e vent insure d ag ainst.
5. CON TRACT OF IN DE MNITY – R ecovery is commensura te with the a mou nt of R IDER
th e loss suf fered . An atta chment to an ins ura nce policy th at modifies the conditions of the policy
As a general ru le, the insurer promises to make g ood only the los s of the b y expand ing or restricting its benefits or e xclud ing ce rtain cond itions from the
insured. coverag e (Bla ck’ s Law Dictionary).
R ide rs are not bind ing on th e insu red unle ss the des criptiv e title or name
E XCEPTIO N: This principle is not applica ble to life and a ccident insurance where thereof is mentione d and written on the bla nk spa ces prov ide d in the policy. It
th e result is d eath becau se life is not capa ble of pecunia ry es tima tion. s hould be countersigne d by the insured or owner unless he wa s the one who
a pplied for the s ame (IC, Se c. 50).
WHAT MAY BE INSUR ED
WHO MAY BE INSURED :
V ARIABLE CON TRACT
Th e term va ria ble contra ct s hall mea n a ny policy or contra ct on either a g roup
AN YON E except a public enemy ma y be insured .
or on a n ind ivid ua l ba sis issue d by an insura nce company providing for benef its
A pu blic e ne my is a na tion a t wa r with the Philippines and ev ery citizen or
or oth er contra ctua l pa yments or va lues th ereu nd er to va ry so a s to refle ct
sub ject of such na tion. It d oes not includ e mob s, thie ves, or robbers.
inv estme nt results of any se grega te d portfolio of inve stments or of a
d esig nated sepa ra te a ccount in which amounts received in connection with such
Q UE STIO N: May a membe r of th e MILF or Abu Sayya f, be ins ured w ith a contracts sh all ha ve been placed a nd accounted f or se pa ra te ly and a part from
compa ny licensed to d o bus iness u nder the Insu ra nce Code of the Philippines? other inves tments a nd a ccounts. This contract ma y als o provid e benefits or
v alu es incid enta l thereto payab le in fixe d or va riable a mounts, or both. It shall
Consent of the Pe rson Insured is NO T E ssential to the Va lid ity of th e Policy not be de emed to be a security or securitie s a s d efined in The Se cu rities Act,
So long as it could be proved tha t the insured ha s a n insu ra ble interest a t the a s amend ed, or in the Inv estme nt Company Act, a s a mende d, nor subject to
inception of the policy, the insurance is va lid e ven w ithout s uch consent. (Sec. reg ulations u nd er sa id Acts.
10, IC)
CLAIM SE TTLE MEN T w hich has a te nd ency to mislea d; a nd
This re fers to the ind emnification of tha t suffe red by the insure d. Such fact in eith er case is materia l to the risk .
The claimant may b e the:
Insure d; E F FE CTS OF MISRE PRSE N TATION :
Reins ured , the insurer who is e ntitled to subroga tion; or It renders the insurance contract void a ble at the option of the insure r,
A third party who ha s a cla im a ga inst the ins ured a lthough the policy is not the reby rendered void a b initio. The injured party
e ntitled to rescind from the time when the re presentation be comes fa lse.
RULE S IN CLAIM SE TTLEME N T Th e a ccepta nce of the premium will not estop the insurer from rescind ing the
N o insurance compa ny d oing busine ss in the Philippine s sh all ref use, without policy on the ground of misreprese ntation.
justifiab le ca use, to pay or settle cla ims a rising under coverag e provid ed by its
IN CON TESTABILITY CLAUSE
policies, nor shall a ny such company eng ag e in unfa ir claim settle ment practices.
Af ter the policy of life insurance ma de pa ya ble on the d eath of the ins ured
s hall ha ve been in force d uring the lifetime of th e insu red for a period of tw o
PRIN CIPL E OF SUBR OGATION
(2) yea rs from the da te of its issue or its la st reins ta tement, the insurer
If the plaintiff’ s property ha s be en insured , a nd he has re ce ived ind emnity
ca nnot prov e that the policy is v oid ab initio (construe d as void able ) or is
from the insurance compa ny for the inju ry or loss a rising out of wrong or
rescind ible by rea son of the fraud ule nt concealment or misrepres enta tion of th e
breach of contract complained of, the insura nce company sha ll be subrog ated
ins ured or his a gent
to the rights of th e insu red a ga inst the w rongd oer or the person who h as
viola te d the contra ct (N CC, Art. 220 7).
Unde r the Ne w Civ il Cod e, a contra ct is void a ble if the conse nt b y one party is
PUR POSES OF SUBROGATION v itia te d by mistake or fra ud. The incontesta bility cla use in the Insu ra nce Code
To ma ke the pers on who ca used the loss lega lly responsible for it. is a n exception to th is Civ il Cod e provision. The incontestab ility clause provides
To prevent th e insu red from re ce iving d ou ble recovery from the wrong doer a nd tha t a life insura nce policy sh all be incontestable a fte r two yea rs from the
th e insu rer. d a te of iss uance, reg a rd less of a ny mista ke, fra ud , concealme nt or
To prevent th e tortfeas ors from be ing free from lia bility and is th us f ou nd ed mis repre senta tion. Unde r Ph ilippine law s, it ma y only be conteste d on the g round
on consid era tion of public policy. of non-pa yment of premiums

RE SCISSIO N OF AN IN SURAN CE CON TRACT

Philippine Deposit Insurance Corporation
CON CEAL MEN T
Conce alment is a neg lect to communica te th at wh ich a pa rty know s a nd ought PD IC exis ts to protect d epos itors by providing d eposit insurance cove ra ge for
to commu nica te (IC, Sec. 2 6). the de positing public and h elp promote fina ncial stability.
Und er Section 2 7 of the Insu ra nce Code, “ a concealme nt e ntitles the injured
PD IC is a government instrumenta lity crea ted in 196 3 by virtue of R epublic Act
party to re scind a contra ct of insurance.” Moreover, und er Se ction 168 of
3591 to provid e d epositor protection and promote fina ncial stability. It is an
th e Insurance Cod e, th e insu rer is entitled to rescind th e insu rance contra ct in
a ttach ed ag ency of the Ba ngk o Se ntra l ng Pilipinas.
cas e of an altera tion in the use or condition of the thing insured (Ma la ya n
Insura nce Company vs . PAP Co., G.R . N o. 20 0784, Augu st 7, 20 13, in Div ina Th e PDIC’ s core mand ates a re d epos it insura nce a nd liquid ation of clos ed
20 14).
b anks.

RE Q UISITE S OF CO NCE ALME NT E ffective June 1, 2 009, th e ma ximum deposit insu ra nce covera ge is P500,000
A pa rty knows a f act which he neg lects to communica te or disclose to th e per d epositor. All de posit accounts by a d epos itor in a close d bank maintaine d in
oth er pa rty; the same right a nd capa city sha ll be ad ded toge ther.
Such pa rty concea ling is duty bound to dis clos e su ch fa ct to the other;
Unde r R .A. N o. 9576, the PD IC ma y propose to ad just th e MD IC, sub ject to the
Such pa rty concea ling make s no w arra nty as to th e fa ct concea led ;
a pprova l of the Pre side nt of th e Philippines, in cas e of a cond ition tha t
The othe r pa rty has no mea ns of asce rta ining th e fa ct concea led ; and
thre atens the mone ta ry and fina ncial stability of the ba nking system tha t may
The fa ct mus t be ma te ria l.
h ave systemic conse quences.

TE ST OF MATE RIALITY: E xcept for th e ex clusions s tipula te d in RA 9576 , d eposits of all comme rcia l
It is d ete rmined not by th e ev ent, but sole ly by th e proba ble a nd rea sona ble b anks, sa vings a nd mortg ag e b anks, ru ra l ba nks, priva te d evelopment ba nks,
influe nce of the fa cts u pon the party to wh om the communication is du e, in coopera tive b anks, sa vings a nd loa n a ssocia tions, as well a s b ranche s a nd
forming h is es tima te of the dis ad vantag es of the propose d contra ct, or in a g encies in th e Philippine s of foreig n b anks and a ll other corpora tions authorized
mak ing his inqu irie s (IC, Sec. 31). to perform b anking functions in the Philippines , a re insured with PD IC. As f or
Ph ilippine b anks with branche s outside the country, R A 9576 stipula tes that
MISR EPR ESEN TATION s ubject to the approva l of the Boa rd of Dire ctors, a ny ins ured b ank with
It occu rs when the fa cts fail to corres pond with its a ssertions or stipula tions. b ra nch outs ide th e Philippines ma y elect to includ e f or insu ra nce its d eposit
obliga tions payable a t such bra nch .

RE Q UISITE S: Th e ma ximum deposit insu ra nce covera g e (MDIC) refers to th e ma ximum amount
The insured sta te d a fact w hich is untrue; of de positor’ s mone y in a n insured ba nk g uaranteed a s sa fe by th e PD IC.
Such fa ct wa s stated with know led ge th at it is untrue and w ith inte nt to Sta rting March 15, 202 5, d eposits will now be insured by the new MDIC of ₱ 1
d eceive or which he sta tes positively a s true without knowing it to be true and million. This a llows for more d eposits to be protected . The new MDIC of ₱ 1
million will ha ve a prospectiv e a pplication a nd w ill only a pply to deposits
mainta ined in ba nks orde red closed on March 15, 2 025, and thereafter.

As such, when a bank is closed prior to March 15, 2025, d eposits will be
covere d up to ₱ 500 ,000 only.

Ba sed on the new MDIC, w hat w ou ld be the new insurable d eposits of F e

Sa ntos in va rious insta nces?

R eplace th e v alue s in the third column of the tab les.

R EQ UIR EME N TS FO R CL AIMS

Wh enever a n insured ba nk sha ll ha ve b een close d, or upon expiration or

revocation of a bank’ s corpora te te rm, pa yme nt of th e insu red d eposits on
s uch closed b ank sha ll b e ma de by the Ph ilippine D eposit Insura nce (PDIC) a s
s oon as poss ible.
“ Splitting of d eposits occu rs whenev er a deposit a ccou nt w ith a n outs ta nd ing
ba lance of more than the statutory ma ximu m amount of insure d deposit Th e pa yment ma y be e ithe r by cash or by making a va ila ble to e ach depositor a
mainta ined unde r the name of na tural or ju rid ical persons is b roken down and tra nsferred d eposit in a nother insu red ba nk in a n amount equa l to ins ured
transf erred into two (2 ) or more a ccou nts in th e na me/s of natura l or juridica l d eposit of such d epositor.
pers ons or entities who h ave no be neficia l ownership on transferred d eposits in
Be fore pa yme nt, PDIC, a s D eposit Insure r, may re quire proof of claims to be filed
th eir names within one hund red twenty (120 ) da ys immed iately pre ceding or
b efore paying the insured d eposits. In case PDIC is not sa tisf ied a s to th e
d uring a ba nk-de clared ba nk holid a y, or imme dia te ly preced ing a closure ord er
v alid ity of a cla im for a n insured de posit, it may require fina l determina tion of
issu ed by th e Monetary Boa rd of th e Ba ngko Sentra l ng Pilipina s f or the
the cou rt bef ore pa ying su ch cla im.
purpose of a va iling of the max imum d eposit insurance cove ra ge;”

Wh en should the d epos itor of a close d insure d bank file his claim with PDIC?

Th e d epositor of the closed insu red ba nk h as 24 months from da te of b ank

tak eover to file his de posit ins ura nce cla im.

D epositors wh o a re required to file d epos it insura nce cla ims are the following:

Th os e w ith va lid d epos it accounts with b ala nces of more tha n Php100,000 .0 0;

Th os e w ith outsta nd ing oblig ations w ith th e closed bank either as borrower,
co-mak er, or as spouse of borrower;
Those with incomplete ma iling a dd re ss found in the ba nk record s, or fa iled to b y hidd en ch arges, uncerta inty of interest ra te s, d ed uction of inte rests f rom
upd ate them through th e MAUF issu ed by th e PD IC; the loaned a mount, a nd the like.

Those with a ccounts maintained u nd er the na me of busine ss e ntities; D isclosure require ment

Those with a ccounts not eligible for e arly payme nt, reg ardless of types of Section 4. Any cred itor sha ll furnish to ea ch person to whom credit is e xtend ed ,
a ccount a nd account balance per a dv ice of PDIC; and prior to the consummation of the transa ction, a clea r sta tement in writing
s etting forth, to the extent applicab le and in a ccorda nce w ith ru les and
Those who are d ecea sed whose filing of cla im is th ru the leg a l he irs.
reg ulations prescrib ed by th e Boa rd , the following informa tion:

(1) th e ca sh price or d elive red price of the property or serv ice to be acquired ;
If the de posit account in a closed b ank is more than P500,0 00.00 , w hat
ha ppe ns to th e ex ce ss of th e ma ximum amount of insu red d eposit? (2) the amounts, if a ny, to be cred ited a s down pa yme nt a nd/or trad e-in;

The claim for th e uninsu red portion of the de posit is a cla im a g ainst the asse ts (3) the d ifference be twe en the amounts set forth unde r cla use s (1) and (2);
of the closed ba nk.
(4) th e cha rg es, individu ally itemized , which are pa id or to be pa id by su ch
The claim may b e filed with the Liquida tor of the closed ba nk within sixty (6 0) person in connection with the transa ction b ut which are not incid ent to the
d ays from publica tion of notice of closu re. Howeve r, payment of sa id claim will e xtension of cre dit;
d epend on th e ba nk’ s ava ila ble ass ets and a pprova l of the Liquida tion Court.
(5) the tota l amount to be financed ;
The sched ule of pa yment beyond the P500,000 .0 0 ma ximum insurance s hall be
ba sed on priorities set by la w.
(6) th e fina nce cha rg e expres sed in terms of pe sos a nd ce ntav os ; a nd

(7) the perce nta ge tha t th e fina nce b ears to the tota l a mount to be f inanced
e xpresse d as a simple annua l rate on the outsta nding unpa id ba lance of the
obliga tion.

CO VE RED TRAN SACTIO NS

(2) "Credit" mea ns a ny loan, mortg ag e, de ed of trus t, ad va nce , or d iscou nt; any
conditiona l sa les contra ct; any contract to sell, or sale or contra ct of sa le of
prope rty or services, either for pres ent or fu ture d eliv ery, u nd er wh ich pa rt or
a ll of the price is pa ya ble subse qu ent to the making of such sale or contra ct;
a ny rental-purchase contract; a ny contract or a rra nge me nt f or the hire ,
b ailme nt, or leasing of property; a ny option, d emand , lien, pledg e, or other cla im
a g ainst, or for th e d eliv ery of, property or money; any purcha se, or other
a cquisition of, or a ny cred it upon the security of, any oblig ation of claim arising
out of any of the fore going ; a nd any transa ction or se ries of tra nsactions
h aving a s imila r purpose or effe ct.

Conseque nces of non-compliance

Section 6. (a ) Any cred itor who in connection w ith a ny credit tra nsa ction fa ils
to d isclose to a ny person any informa tion in viola tion of this Act or a ny
reg ulation is sued there under sh all be lia ble to such person in the a mount of
P100 or in a n a mou nt e qu al to twice the f inance ch arged required by such
creditor in connection w ith such transa ction, whiche ver is the g rea ter, except
tha t such liab ility s hall not exceed P2 ,000 on a ny cred it transa ction. Action to
recover such penalty may be brough t by such pe rson w ithin one year from the
d a te of the occurrence of th e v iolation, in any court of competent juris diction.
In any a ction und er th is su bsection in w hich a ny person is entitled to a
Truth in lending act (RA NO. 3765)
recovery, the cred itor s hall be lia ble for rea sonable a ttorney's fe es a nd court
Date approved: Approved: June 22, 1963 costs a s d etermined b y the court.

PUR POSE N B: Prescriptive period is one (1) ye ar from the d ate of the d ate of de mand
a nd not f rom the da te of the promissory note .
To protect users of cred it from lack of a wa reness of the true cost thereof,
proceed ing from the experience tha t ba nk s a re ab le to conceal such true cost
LAW ON SECRECY OF BANK DEPOSITS tax a uth ority pursua nt to a n interna tiona l convention or a g reeme nt on ta x
(R.A. 1405, AS AMENDED) ma tters to which th e Philippines is a pa rty (Ibid )

In ca se of d orma nt a ccou nts/de posits for at lea st 10 yea rs unde r the

PURPOSES OF RA 1405 Unclaime d Bala nces Act (Act No. 3936, Sec. 2 )

The purposes of R A 140 5 a re: Th e proh ibition ag a inst exa mination of b ank deposit d oes not preclu de its
g a rnishment to sa tisf y a jud g me nt a g ainst the depositor (Oña te v. Abrog ar, G.R.
E ncourag e deposit in banking ins titutions; a nd
N o. 10 7303, F ebrua ry 21, 1994)

Dis courag e priva te hoa rd ing so th at ba nks ma y lend su ch fund s a nd ass ist in
Presid entia l Commis sion on Good Government (PCGG) may require the production
th e e conomic d evelopment of the country.
of ba nk re cords material to its investig ation (Opinion of the Se cretary of
Justice, Feb rua ry 27, 1987)

Th e Anti-Mone y Lau nd ering Cou ncil (AMLC) ma y inqu ire into any d epos it with
Prohibite d acts :
a ny ba nk in ca se of viola tion of the RA 9160 or the AMLA if there is prob able
The following a re th e proh ibited acts in RA 1405: ca use tha t it is related to an unlaw ful activity (RA 916 0, as ame nd ed , Sec. 11)

E xamina tion/inquiry/looking into all d eposits of w hatever na ture with ba nks or Th e PDIC and the BSP ma y exa mine d eposit a ccounts a nd all informa tion related
ba nking institutions in the Philippines (including investme nt in bonds issu ed by th e to them in case of a finding of unsa fe or unsound ba nking pra ctices (R A 3591,
g ov ernment) by any person, g overnment officia l or office (RA 1405, Sec. 2). a s amend ed, Sec. 8)

Dis clos ure by a ny official or e mployee of a ny banking institution to a ny

una uthorized person of a ny inf ormation conce rning sa id de posit (RA 1405, Sec.
WITH COURT ORDE R:
3).

In ca ses of u ne xplaine d wea lth und er Sec. 8 of the Anti-Graft a nd Corrupt

Practices Act (PNB v. Ga ncayco, L-18343, Septe mber 30 , 1965)
Deposits cove red :
In ca ses file d by the Omb udsma n a nd upon th e la tter’ s a uth ority to ex amine
1. All d eposits of wha teve r na tu re with b anks or b anking institu tions f ou nd a nd ha ve a ccess to b ank accounts and record s (Marquez v. Desierto, GR
in th e Philippines. 13856 9, Septe mber 11, 20 03)

2. Inve stments in bonds issue d by the Philippine g overnment, its bra nch es,
and institutions (R.A. 1405, Se c. 2).
WITH OUT COURT O RDE R:
3. Trust a ccounts
1. If th e AML C d etermines tha t a particula r de posit or inve stment with any
b anking institu tion is related to th e follow ing (H K-MADS):

E xceptions: - Hija ck ing,

1. Upon writte n cons ent of th e d epositor (RA 1405, Sec. 2) - Kidna pping,

In ca ses of impea ch ment - Murd er,

Upon orde r of compe tent court in cases of b ribe ry or dereliction of d uty of - Destructive Arson, and
public officia ls
- Viola tion of the D ang erous Drugs Act.
In ca ses where the money d eposited or invested is the subject ma tter of the
litig ation - Acts of Terrorism or in violation of H uman Se cu rity Act.

OTH ER IN STAN CES GAR NISHME NT OF D EPOSITS (including foreig n d epos its)

Section 9 of Rule 39 of the 2019 Amend ments to the Ru les of Court states
Upon orde r of th e Commissioner of Interna l R evenue in respect of the ba nk
d epos its of a d eced ent for the purpose of d ete rmining such de ce dent’ s g ross tha t:

estate (N IRC, Sec. 6[F ][1])

Section 9. E xecution of jud gme nts f or money, how enforce d. —

Upon the ord er of the Commiss ione r of Internal Reve nue in res pe ct of ba nk
(a) xx x
d epos its of a tax pa ye r w ho ha s filed a n a pplication for compromise of his ta x
lia bility by reason of fina ncial incapa city to pay his tax lia bility (Ib id) (b) xxx

Th e Commissioner of Interna l Revenue is au thorized to inqu ire into bank (c) Garnis hment of d ebts a nd cred its. — The officer ma y levy on d ebts d ue
d epos its of a specif ic taxpa yer upon request for tax informa tion from a foreig n the ju dg ment oblig or a nd other credits, includ ing bank de posits, fina ncia l
inte rests, roya lties, commissions a nd other persona l property not ca pable of
manu al delivery in the posse ssion or control of third pa rties. Levy sha ll be mad e
by serving notice upon the pe rson owing s uch d ebts or ha ving in h is posse ssion
or control such credits to w hich the judg ment oblig or is e ntitled. The
g arnishment sha ll cove r only su ch a mou nt a s will satisfy the ju dg ment and a ll
la wful fees .

Bank accounts ma y be g a rnished by the cred itors of th e d epositor. The re is no

viola tion of the Law on Secrecy of Bank Deposits if th e a ccou nts a re
g arnished . The amount of deposit is a ctua lly not disclose d and the intent of
th e legis lature d oe s not cover ga rnish ment.

F oreig n currency de posits shall be ex empt f rom a ttachment, ga rnishment, or a ny

oth er orde r or process of a ny court, le gis lative body, government ag ency or
a ny a dministrative body wh atsoever (RA 6426, Se c 8).

E xception: Th e a pplication of Sec. 8 of R A 6426 d epends on th e e xtent of its

justice . The ga rnis hment of a foreign currency d eposit should be allow ed to
prev ent inju stice and for equita ble grou nd s, othe rwise , it would neg ate Article
10 of th e N ew Civil Code which provides th at “ in ca se of d oubt in the
inte rpre ta tion or a pplica tion of la ws, it is pres umed th at the lawma king bod y
inte nded righ t and justice to prev ail (Sa lva cion v. Ce ntra l Ba nk of th e
Philippines , G.R. 94723, Augus t 21, 1997).