THE Securities and Exchange Commission (SEC) is taking action to protect borrowers from harassment and unethical practices by financing and lending companies in collecting debts.

In a notice issued May 20, 2019, the Commission released a draft memorandum circular on the Prohibition on Unfair Debt Collection Practices of Financing Companies and Lending Companies, for public comment.

The SEC drafted the circular following numerous complaints against financing and lending companies and their third-party service providers allegedly harassing borrowers and employing abusive, unethical and unfair means to collect debts.

In some cases, a collection agent would threaten to disclose the borrower’s indebtedness on social media or make it appear that a formal complaint has been filed against the borrower.

“Financing and lending companies have the right to collect amounts due them, but they can exercise such right only through reasonable and legally permissible means,” said SEC Chairperson Emilio B. Aquino.

“As the overseer of financing and lending companies, the Commission will take all the necessary steps to tackle abusive, unethical and unfair practices of collecting debt. In parallel, we will intensify our efforts to promote responsible borrowing.”

Under the draft memorandum circular, the following conduct shall constitute unfair collection practices:

| use of threat or violence and other criminal means to harm the borrower, his/her reputation, or his/her property;

| use of threats to take any action that cannot legally be taken;

| use of obscenities, insults, or profane language, which abuse the borrower and/or amount to a criminal act or offense under applicable laws;

| disclosure or publication of the borrower’s name and other personal information, except in certain cases;

| communicating or threatening to communicate to any person loan information, which is known or which should be known to be false, including the failure to communicate that the debt is being disputed, except in certain cases;

| use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a borrower; and

| making contact at unreasonable/ inconvenient times or hours.

The Commission looks to require financing and lending companies to ensure their personnel handling the collection of accounts shall disclose his/her full name or true identity to the borrower.

The draft circular also requires financing and lending companies to keep a borrower’s data strictly confidential, except when the borrower gives a written consent for the disclosure of such information, or upon the order of a court of competent jurisdiction or a government agency or office authorized by law.

Other financial institutions, credit information bureaus, lenders, their subsidiaries and affiliates may receive a borrower’s information to measure creditworthiness. Collection agencies, counsels, other agents and third-party service providers can also access such information for specific purposes.

While they can outsource the collection of debts, financing and lending companies will maintain the responsibility in complying with the proposed circular.

The provision on the outsourcing of collection should address the practice of financing and lending companies of purposefully engaging a third-party service provider to avoid liability for client harassment, by invoking the latter’s separate juridical personality.

The proposed circular provides for penalties ranging from P25,000, in the case of lending companies and P50,000, for financing companies, to suspension or revocation of certificate of authority to operate as a financing or lending company.

Interested parties may submit their inputs, views and comments on the draft circular in the prescribed format until June 5, 2019 through a letter addressed to the Commission’s Corporate Governance and Finance Department, an email to cgfd@sec.gov.ph, or fax to (02) 818-5990. (PR)