Pre-need pyramiding

Q. A concerned mom from Pandacan, Manila, called the consumer hotline and asked whether pension plans are into pyramiding as well. Her husband bought a pension plan for her and she wants to know if she can look forward to a little something as pension after 10 years.

A. Theoretically, pre-need companies are not into pyramiding. For a certain amount of money, you will get the promised amount commensurate to your investment after a specified period of time. What is considered pyramiding is when the pre-need company uses the income generated from new accounts to pay maturing plan holders. You can check the financial status of your company either with the Insurance Commission or the Securities and Exchange Commission. Pre-need companies fall under the jurisdiction of IC while insurance companies are regulated by SEC.

Q. I want to file a complaint against a company I’ve invested in because I’m convinced now that it’s really a pyramiding scam! Aside from the DTI, what other government agencies address this issue? Which one of these agencies (if there are others) should I file my complaint with?

A. You were not too specific as to why you think the company you invested in is involved in pyramiding. However, you may find this information useful. Cases or complaints involving the issuance of unregistered securities such as documents, instruments, certification, coupons and registration/membership forms are referred to the Securities and Exchange Commission. This is mandated under Batas Pambansa No. 78.

DTI’s jurisdiction on pyramiding is based on the Consumer Act of the Philippines, which prohibits the employment of chain distribution plans in the sale of consumer products–where the opportunity to derive earnings on the investment primarily comes from the recruitment of other investors rather than from the sale of consumer products, services and credit.

When the cases involves both consumer goods and unregistered "securities", DTI and SEC may take simultaneous but separate and distinct actions.

Q. I called the DTI hotline and filed a complaint against a company that is engaged in a pyramiding scam. What is DTI doing about it?

A. Your complaint is being reviewed by the Bureau of Trade Regulation and Consumer Protection.

After the review, initial findings on the facts and circumstance given will be determined. The complaint will then be endorsed to the proper regional office, together with BTRCP’s intial findings and recommendations. It is the job of the regional office to investigate the company. If it determines there is indeed a violation of the Consumer Act, specifically the provision on pyramiding, adjudication proceedings will be initiated.

On a broader scope, a public hearing on the draft Department Administrative Order on what constitutes pyramiding and what sanctions can be meted out on violators was held last June 14.

(You may send your consumer complaints and comments to the Bureau of Trade Regulation and Consumer Protection, DTI Bldg., Sen. Gil Puyat Ave., Makati City. DTI’s consumer hotlines are 896-5740 or 890-4932 and www.e-reklamo.net.ph)