REVISED NON-STOCK SAVINGS AND LOAN ASSOCIATION ACT OF 1997

Case Overview and Summary

Summary of the Revised Non-Stock Savings and Loan Association Act of 1997

Declaration of Policy (Section 2):
- Encourage savings, judicious use of credit among members of non-stock savings and loan associations
- Regulate and supervise non-stock savings and loan associations for sound operations
- Establish minimum requirements and standards for non-stock savings and loan associations
- Protect members against misfeasance and malfeasance of trustees and officers

Definition of Terms (Section 3):
- Non-stock savings and loan association: non-stock, non-profit corporation accumulating member savings for loans to members
- Association: refers to non-stock savings and loan associations under this Act
- Monetary Board: the Monetary Board of the Bangko Sentral ng Pilipinas
- Bangko Sentral: the Bangko Sentral ng Pilipinas

Organization of an Association (Section 4):
- 5-15 members of a well-defined group can form an association
- Must secure license from Monetary Board and register with SEC
- Well-defined group defined by Monetary Board, includes employees of one company, government employees, and immediate families
- Entrance fees cannot exceed 1% of member contribution
- Unauthorized use of "Savings and Loan Association" title prohibited

Tax Exemption (Section 5):
- Associations exempt from tax on income and interest on deposits
- Income from properties or for-profit activities subject to taxes
- Interest earnings and member shares from net income exempt from income tax

Confidentiality of Deposits (Section 6):
- Deposits with associations considered confidential
- Disclosure only with depositor's permission or court order in specific cases
- Violation by association official punishable under RA 1405

Powers of Associations (Section 7):
- Accept deposits from and grant loans only to members
- Loans capped at member deposits + 12 months salary or 70% property value
- Loan maturity max 5 years, except 25 years for home loans and agricultural projects
- Can charge interest, invest in government bonds/securities, allow profit sharing, borrow up to 20% of assets, maintain bank deposits, require office space from employer

Restrictions on Associations (Section 8):
- Cannot have demand, commercial or checking accounts
- Cannot advertise as a bank
- Cannot advertise prohibited business

Service Units and Agents (Sections 9-10):
- Can open service units with Monetary Board approval
- Agents and salesmen require Monetary Board license

Merger or Consolidation (Section 11):
- Associations of one company/department can merge with Monetary Board approval

Trustees and Officers (Sections 12-14):
- Only members eligible as trustees
- Officers with access to money must be bonded
- Compensation cannot be based on loan volume/interest, except salaries, commissions, performance bonuses
- Compensation increases over 10% per year require Bangko Sentral approval

Lending Limitations (Sections 15-17):
- Loans limited to available cash and credit
- Loans to trustees/officers capped at 20% of capital with trustee approval
- Violation is punishable offense
- Loans require written agreement with interest rate
- Officers liable for unauthorized loans

Investment Limitations (Section 18):
- Bond/security investments over 10% of assets require approval
- Real property investments capped at 5% of assets
- Office investments capped at 10% of capital

Reserves (Section 19):
- Withdrawable share reserve of 2-3% of capital contributions required
- Cannot distribute net income if reserve is below minimum

Member Withdrawal (Section 20):
- Revalued surplus imputed to allow equitable distribution to withdrawing members

Reporting (Section 21):
- Annual financial statement within 120 days after fiscal year end

Regulatory Powers (Section 22):
- Monetary Board regulates operations, capital, integrity of organizers/officers
- Sets lending limits, procedures, accounting, audits, training
- Requires bonds for accountable officers
- Sets limits on funds, investments, reserves
- Issues rules and advisory assistance
- Conducts investigations, takes remedial measures
- Can revoke/suspend license for insolvency or violations

Penalties (Section 23):
- Willful refusal of examination punishable under RA 7653 Sec. 34
- False statements punishable under RA 7653 Sec. 35
- Violations punishable under RA 7653 Sec. 36
- Accepting gifts/fees for loan approval punishable by P10,000 fine or 3x loan amount
- Loan fraud by applicant punishable by P5,000 fine or 3x loan amount
- Examiner overvaluation punishable by P10,000 fine or 3x loan amount

Fees and Implementation (Sections 24-25):
- Associations may contribute annual fee set by Monetary Board
- Bangko Sentral can require government services/facilities for implementation

Reporting and Association (Sections 26-27):
- Monetary Board submits annual report to Congress
- Membership in accredited association of associations encouraged

Applicability and Repeals (Sections 28-30):
- RA 7653 and RA 337 apply if not inconsistent
- RA 3779 repealed
- Inconsistent laws repealed

Effectivity (Section 31):
- Effective 15 days after publication in Official Gazette or newspapers