DTI Issues DAO No.21-03 Prohibiting Dealerships From Selling New Vehicles on Installment Only Basis

DTI DAO No.21-03

Updated on September 23 2023

The Department of Trade and Industry (DTI) recently issued Department Administrative Order (DAO) No. 21-03 or the Guidelines for Payment Options on the Purchase of Consumer Products and Services.

No—It Doesn't Mean Installment Payments Are Dead

This new order prohibits selling products on an ‘installment only’ mode of payment and mandates all persons, companies, or business organizations to offer consumers the option to pay in cash, installment, or a combination of the two in pursuant to Republic Act No. 7394 or the Consumer Act of the Philippines.

Your Choice, Your Consumer Right

“The DTI highlights the consumer’s right to choose not only on products and services that she/he needs but also the mode of payment for these goods or services,” said Atty Ruth B. Castelo, DTI Consumer Protection Group (CPG) Undersecretary. “The DTI reminds all sellers to comply with DAO No. 21-03 to avoid being penalized.”

New DAO: Guidelines About Installment Purchase Surcharges and Interest Rates

“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,” according to DAO No. 21-03.

Additionally, the seller is prohibited from imposing an interest rate higher than the market-oriented rate for installment purchases, and that “no interest shall be due unless expressly stipulated in writing in accordance with article 1956 of the Civil Code.”

Sellers are also forbidden from collecting advanced interest of more than a year, and sellers of bigger items – like cars, for example – are 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.

Furthermore, the DAO is encouraging business owners to present all available payment options in a manner that is easily understood by consumers. Also, all available payment options (whether cash, installment, credit card, QR codes, electronic transfers, etc.) should be posted within the physical store so buyers or consumers are aware of the different modes of payment available.

The Right to Choose Your Mode of Payment

In the Philippines, it is common practice for car and motorcycle dealerships to sell hot-ticket or popular-selling vehicles on an installment-only basis, often forcing the buyer to avail of in-house financing options. With the DTI’s new DAO No. 21-03, buyers have the freedom of choosing a mode of payment when purchasing goods and services.

Violators of DAO No. 21-03 can face imprisonment for a period of up to five months to one year or pay a fine of P500 to P10,000 or both. You can contact the DTI at ConsumerCare@dti.gov.ph or call the One-DTI (1-384) hotline for any consumer-related concerns.