Session 6 Legal Action 1. Local Court 2. Small Claims Court.
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Transcript of Session 6 Legal Action 1. Local Court 2. Small Claims Court.
Session 6
Legal Action
1. Local Court
2. Small Claims Court
Is Legal Action the only option now?
• You have verified that the borrower can pay but refuses to pay.
• You have done all efforts to collect.
• Still, the borrower refuses to badge!
• GO AHEAD AND FILE A CASE…BUT BEFORE YOU DO, LET US REVIEW A FEW THINGS.
In a Legal Action the loan documents are key
1. Ensure that the borrower has received all three (3) demand letters.
2. Loan documents should have complete information & signed by all parties.
3. PN should indicate the amount borrowed, rate of interest, penalty charge, if any, and signatures of principal borower, co-borrowers or co-makers.
4. Having complete documentation can insure a successful legal action and recovery.
Filing a Court Case
In a court case, the principal borrower, co-makers become co-defendants
Tips to filers: – Court decisions have usually considered
“excessive” interest rates that are higher than 12% p.a. and penalty rates are often waived.
– Before deciding on filing a case, try attracting delinquent clients to pay with a full waiver of penalty. This avoid the expense and time for litigation.
Regular or Small Claims Court?
For a claim over P100,000: File complaint with the Local Court.
For a claim of P100,000 or less: File the complaint with the Small Claims Court.
Small Claims Court• Definition
Are first level courts that hear and decide small claims.
( Metropolitan Trial Courts,Municipal Trial Courts in Cities, Municipal Trial Courts and Municipal Circuit Trial Courts.
• Small Claims Cases
- Civil Cases involving money claims not exceeding P100,000, excluding interests and costs.
Most microfinance loans will most likely qualify as
SMALL CLAIMS CASES
In a Small Claims Court ….
1. Decision- rendered on the same day of hearing and is final and unappealable.
2. Appearance of Attorney- not allowed during the court proceedings.
3. Role of Judge- to ascertain the factual matters at issue and to elicit the evidence and render a decision- all in one hearing.
4. Execution- if decision is in favor of the plaintiff, execution shall issue upon motion.
Lower Fees for Small Claims Cases
1. Fees- P2,000 docket and legal fees.• Additional Filing fees for frequent filers- plaintiff who
have more than 10 claims within a calendar year.
( See illustration)
Example• Frank’s Bank is a corporation serving many small
businesses in Muntinlupa City. During calendar 2010, Frank’s Bank filed 50 small claims within the Court of Muntinlupa.
Additional Filing Fees
11th-20 claims 500 Pesos per claim
21st – 30th claims 600 pesos per claim
31st-40th claims 700 pesos per claim
41st-50th claims 800 pesos per claim
The maximum filing fee for any claim by frequent filer is P20,000
Where Cases can be filed
3 Options
a. Place of the bank’s head office
b. Place of branch office where loan transaction originated
c. Place of residence of the defendant
Borrower- Bank Action on Court-mandated Agreement
Borrower ActionBorrower Action Bank OptionBank OptionBorrower pays loan in full Bank closes account.
NOTE: NO RELOANS to borrowers brought to court.
Borrower surrenders item/s specified in Court inventory of recoverable assets
Keep visiting client/remind about loan payment
Have borrower sign Authority to Sell, then sell item/s
Borrower-Bank Action on Court-mandated Agreement
Borrower ActionBorrower Action Bank OptionBank Option
Borrower does not abide by agreement
Request Regular Court to issue 2nd (up to the 3rd) summons.
For Small Claims case, where a decision is final and executory, Bank should file a Motion for Execution of Judgment on the basis of which Court will issue a Writ of Execution. This allows sheriff to take possession of defendant’s property/ies listed in the court inventory.
What if…You failed to recover anything? Anong gagawin?
• Write off the account, if you have not already done so.
• Well, “when you have lemons, make lemonade.” Reflect well on the lessons and learn from it: – How you can improve the bank’s screening process;– How you can improve the approval system:– How you can improve the monitoring of accounts,
loan collection and follow up.– How much loss the bank incur.
Session Handouts
• “Handbook on the Rule of Procedures for Small Claims Cases,” published under the USAID-supported Rule of Law Project of the Supreme Court
• Flow Chart of Procedures for Small Claims Cases
• MABS “A Quick Guide for Banks and Their Representatives,” October 2011
• Set of forms for Small Claims Case
Questions?