SEC issues memorandum on unfair debt collection practices

MANILA, Philippines — The Securities and Exchange Commission (SEC) has issued a memorandum circular preventing unfair debt collection practices such as the use of insults or profane language, violent threats or false representation.

In the new circular, the SEC said that financing companies, lending companies and their third-party service providers could no longer harass borrowers and employ unfair means to collect debt.

“Financing companies, lending companies and third party service providers hired by them may resort to all reasonable and legally permissible means to collect amounts due them under the loan agreement provided that, in the exercise of their rights and performance of their duties, they must observe good faith and reasonable conduct and refrain from engaging in unscrupulous and untoward acts,” the SEC said in the circular issued Aug. 19.

The SEC said such unfair debt practices include the use of obscenities, insults or profane language; publication of the names and other personal information of the borrowers; and the use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a borrower.

Furthermore, the corporate regulator said that making contact at unreasonable or inconvenient times or hours – before 6 a.m. or after 10 p.m. – is not allowed. This is unless the account is past due for more than 15 days or the borrower has given express consent that the said times are the only reasonable or convenient opportunities for contact, the SEC said.

Financing and lending companies found to be violating the circular face penalties ranging from P25,000 for lending companies and P50,000 for financing companies for the first offense to P50,000 to up to P1 million for both for the third offense and possible suspension or revocation of their license.

The SEC issued the circular because it has been receiving numerous complaints against financing and lending companies that allegedly harass borrowers and employ abusive, unethical and unfair means to collect debts.

It said the SEC has regulatory and supervisory jurisdiction over these companies by virtue of Republic Act 8556 or the Financing Company Act of 1998 and Republic Act 9474 or the Lending Company Regulation Act of 2007.

Last May, the National Privacy Commission (NPC) said it also looked into 48 online lending applications that allegedly shamed borrowers who failed to settle their obligations on time.

The agency has received over 400 complaints from borrowers over alleged misuse of their personal information, including disclosure of their unpaid balances to other people, it said.