In these times when loans are easily available through online consumer financing or other private lending companies, when there is easy access to online cash loans without any collateral requirements, complex approval procedures, or prolonged application waiting time, many people resort to purchasing their personal needs and wants by obtaining loans through the aforesaid manner. However, unfair and abusive debt collection practices as a result of these loans often lead to extreme amounts of stress. Often, this practice has contributed to the loss of income or employment, marital instability, medical issues, personal bankruptcies, social embarrassment, and invasion of personal privacy. The borrower feels completely defeated and without energy to pursue a course of action to stop the activities and bring perpetrators to justice.
With this in mind, the Securities and Exchange Commission (SEC) has taken steps to address the widespread use of abusive, deceptive and unfair debt collection practices of many creditors and debt collectors, particularly financing companies and lending companies. The SEC released SEC Memorandum Circular No. 18, Series of 2019 (SEC MC No. 18-19) on the prohibition of unfair debt collection practices of financing companies and lending companies, which became effective on Sept. 7. Issued in response to numerous complaints of alleged harassment of borrowers and the use of abusive, unethical, and unfair means to collect debt, the SEC has somehow given refuge and protection to borrowers.
Similar to Section 4304Q.11 of the Manual of Regulations for Non-Bank Financial Institutions, SEC MC No. 18-19 has identified the following as unfair debt collection practice: (i) the use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person; (ii) use of threat to take any action that cannot be legally taken; (iii) use of obscenities, insults or profane language the natural consequence of which is to abuse the borrower and/or which amount to a criminal act or offense under applicable laws; (iv) disclosure or publication of the names and other personal information of the borrowers who allegedly refuse to pay debts, subject to exceptions; (v) 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, subject to exceptions; (vi) use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a borrower; (vii) making contact at unreasonable/inconvenient times or hours, which shall be defined as contact before 6 a.m. or after 10 p.m., unless the account is past due for more than 15 days, or the borrower has given express consent that said times are the only reasonable or convenient opportunities for contact; and, (viii) contacting the persons in the borrower’s contact list other than those named as guarantors or co-makers.
Financing and lending companies have been required to adopt policies and procedures to require their personnel handling the collection of accounts to disclose his/her full name or true identity to the borrower. While these companies can outsource collection of debts, they will maintain the responsibility in complying with the proposed circular. Republic Act No. 8556 or the Financing Company Act of 1998, as amended and Republic Act No. 9474 or the Lending Company Regulation Act of 2007 have given the SEC regulatory and supervisory authority over financing companies and lending companies, which justified the imposition of penalties ranging from P25,000 to P1,000,000, as well as suspension or revocation of the certificate of authority to operate as a financing or lending company. This is without prejudice to other penalties that may be imposed pursuant to Presidential Decree No. 902-A or the SEC Reorganization Act, Republic Act No. 11232 or the Revised Corporation Code, and all other relevant laws and regulations.
This could be an important step to stop debt collection harassment. Perhaps our law makers can consider the passage of a Fair Debt Collection Practices Act to further protect consumers against debt collection abuses. Borrowers should also be given the opportunity to verify or validate the debt and dispute such debt when warranted. They should also be afforded the option to stop immediate contact or cease communication from the collector. Persons who feel victimized by unfair and deceptive debt collection practices should have adequate legal remedy against these abuses.
The views and opinions expressed in this article are those of the author. This article is for general informational and educational purposes, and not offered as, and does not constitute, legal advice or legal opinion.
Mara Kristina O. Recto is an Associate of the Corporate and Special Projects Department of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW).