Installment only purchases are strictly prohibited according to the Department of Trade and Industry (DTI).
The DTI’s newest Department Administrative Order (DAO) no. 21-03, stipulates that all persons or companies, whether registered or unregistered, must provide consumers with the option to pay in cash.
The new DAO, called “Guidelines for Payments Options on the Purchase of Consumer Products and Services” took effect on April 23, 2021.
The DAO specifically says that, “An ‘installment only’ mode of payment is strictly prohibited. Further, the guidelines specify that there should be no additional charge on the selling price if the mode of payment is through debit/credit/prepaid cards, QR codes, electronic fund transfers, or other digital means available, as preferred by the buyer.”
The Administrative Order also has several clauses when it comes to sale by installment. Buyers who choose to pay by installment shall not be subject to “an interest rate more than the market-oriented interest rate. The seller also must not collect an advance interest of more than a year. Additionally for bigger items, the seller is required to release documents that will show ownership of the buyer and must comply with the requirements in case of repossession of products purchased on installment.”
It also states that “no interest shall be due unless expressly stipulated in writing in accordance with Article 1956 of the Civil Code.”
Those caught in violation of this can face the “concomitant penalty of imprisonment for a period of five months to one year or a fine ranging from P500 – P10,000 or both, upon the discretion of the court.”
While the DAO is not addressed to any one industry in particular, it certainly appears strongly influenced by recent reports from a senator that some motorcycle dealers are only selling motorcycles on installment basis. That same senator also claimed these dealers have been withholding registration papers of the motorcycles, preventing the buyers from registering them until they are fully paid.
The DAO essentially says that consumers have the right to purchase an item in cash. For those buying in installment, the interest must be in accordance with the law, and within the market-oriented rate. Even if the items are not fully paid, the buyer of “big items” like motorcycles, must be provided with documentation that show their ownership.
This is certainly a welcome development to many motorcycle buyers that have been met with these issues when purchasing a motorcycle.