BSP strengthens consumer protection

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has strengthened its financial consumer protection framework in light of the increased complexity of financial products and rapid technological innovations in financial products and services.

BSP Governor Benjamin Diokno has issued Circular 1048 stating that the Monetary Board has approved the revision of the framework issued in 2014.

The BSP Charter mandates the central bank to promote broad and convenient access to high quality financial services and consider the interest of the general public.

Diokno said the BSP aims to ensure that financial service providers conduct ethical business practices and do not engage in practices that may cause harm to the consumer as well as consider consumer outcomes in the conduct of their business.

“Practices that harm consumers introduce risks not only at the level of the financial institution, but also to the overall health of the financial sector particularly through decreased public trust and confidence. A well informed and protected consumer can better benefit from the financial services received and be a more responsible client,” he said.

The BSP chief pointed out the framework establishes the guidelines and expectations from BSP supervised financial institutions (BSFls) to institutionalize consumer protection as an integral component of corporate governance and culture as well as risk management.

“The objective of the framework is for BSFIs to manage the risks of financial loss that are detrimental to the financial consumers or consumer protection risks inherent to the BSFIs’ operations that, if not properly managed, would affect other relevant risks, such as compliance, reputational, legal, operational and credit risks,” Diokno said.

The new circular also espouses principles-based consumer protection regulations that are aligned with the BSP’s risk governance and compliance frameworks and consistent with international practices and standards.

Also taking into account the emerging risks associated with digital financial products and services, the framework provides flexibility for the BSFIs to strategize its consumer protection approach commensurate with its business model, corporate structure and risk profile.

The framework has retained the five consumer protection standards of conduct including disclosure and transparency, protection of client information, fair treatment, effective recourse mechanism, and financial education and awareness.

The BSP chief said financial consumers have the right to expect that their financial transactions, as well as relevant personal information disclosed in the course of a transaction, are kept confidential and are secured.

“Toward this end, BSFIs must ensure that they have well-articulated information security guidelines, well-defined protocols, a secure database, and periodically re-validated procedures in handling the personal information of their financial consumers,” Diokno said.

The BSP has also directed BSFIs not to employ practices that discriminate or take advantage of vulnerable groups such as low income earners or persons with disability.

To facilitate transition, banks are to perform a gap analysis of their current consumer protection practices in relation to the new rules and to propose an action plan duly approved by the board of directors to comply therewith.