Republic of the Philippines
HOUSE OF REPRESENTATIVES
Constitution Hills, Quezon City

SEVENTEENTH (17%) CONGRESS
Second Regular Session

House Bill no.7038

Introduced by REPRESENTATIVE ERIC L. OLIVAREZ

EXPLANATORY NOTE

The Philippine Clearing House Corporation’s Memorandum Circular
No. 15-460 has effectively rendered checks and post-dated checks with
erasures and alterations as ineligible and unacceptable for clearing,
regardless of the signature or initial appearing on the check to indicate
authorization of the said alteration or erasure. In light of this, banks in the
country have stopped accepting checks bearing such alterations and erasures
as of January 4, 2016.

While we recognize that this directive is intended to ensure that fraud
is mitigated in banking transactions, it cannot be denied that this measure
shifts the responsibility away from the banks, and transfers it to the end-
users or the individuals. It is as though we are lessening the obligation and
duties of banks and transferring the corresponding burden to the people.

Check alterations and erasures are usually caused by human error and
inadvertence; and this is arguably unavoidable in most cases. Considering
that such errors are considered common or ordinary, it is quite unrealistic to
require that execution of checks and post-dated checks to be completely
perfect and flawless.

On the other hand, banks, as juridical entities, usually in the form of a
corporation, have more resources and better facilities to mitigate fraud and

eliminate forgeries. The banking business is imbued with public interest. This
1


is the reason why the law imposes the highest degree of diligence on them.
Thus it is more rightful, logical and appropriate that the burden of verifying
the authenticity of counter-signatures and counter-initials of clients are left
on their hands.

The banks have strong and proven capability and expertise to detect
various forms of fraud or forgeries. They have well-trained employees/verifiers
to do this job. More importantly, they have the financial ability to rectify errors
and answer for damages if so applicable.

Non-acceptance of checks and post-dated checks with alterations and
erasures on the face manifests a clear diminution in the responsibility of
banks, which somehow reduces the degree of diligence required of them. It is
for this reason that this proposed Act is hoped to be passed and enacted.

b= Sp
ERIC L. OLIVAREZ


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Constitution Hills, Quezon City

SEVENTEENTH (17%) CONGRESS
Second Regular Session

House Bill no.7038

Introduced By REPRESENTATIVE ERIC L. OLIVAREZ

AN ACT ALLOWING THE AUTHORIZATION OF ALTERATIONS AND /OR
ERASURES IN CHECKS THROUGH COUNTER-SIGNATURE OR
COUNTER-INITIAL, THEREBY OVERTURNING THE PERTINENT ITEM
GUIDELINES OF MEMORANDUM CIRCULAR NO. 15-460 OF THE
PHILIPPINE CLEARING HOUSE CORPORATION (PCHC) WHICH
DECLARED CHECKS AND POST-DATED CHECKS WITH ERASURES AND
ALTERATIONS AS INELIGIBLE AND UNACCEPTABLE FOR CLEARING

Section 1. Short Title. This Act shall be known as the “Counter-
Signature on Checks Act of 2017”.

Section 2. Coverage. This Act shall apply to all banks and bank
associations operating in the Philippines.

Section 3. Definition of Terms

Check - A draft signed by a person (the drawer or maker) that
directs a bank (the drawee) to pay, on demand and without
conditions, a specific sum of money to another person (the
payee).

Post-dated check - a check on which the issuer has stated a
date later than the current date.


Bank - shall refer to an entity engaged in the lending of funds
obtained in the form of deposits. As classified by the General
Banking Act of 200, it shall include:

(a) Universal banks;
(b) Commercial banks;
(©) Thrift banks, composed of:
(i) Savings and mortgage banks,
(ii) Stock savings and loan associations, and

(iii) Private development banks, as defined in
Republic Act No. 7906

(d) Rural banks, as defined in Republic Act No. 7353
(e) Cooperative banks, as defined in Republic Act No. 6938

(9 Islamic banks as defined in Republic Act No. 6848,
otherwise known as the "Charter of Al Amanah Islamic
Investment Bank of the Philippines"; and

(g) Other classifications of banks as determined by the
Monetary Board of the Bangko Sentral ng Pilipinas.

Bank Association - any organization of universal and commercial
banks in the Philippines, comprising of local banks, foreign bank
branches in the country, or both, as members.

Erasure - the removal or obliteration of the writing on a check or
a post-dated check, which is usually, but not exclusively, signified
by drawing a horizontal line or a strike-through over the pertinent
text, word or phrases. For purposes of this Act, an erasure is only
acceptable when made with the authority of the drawer or of any
other party to the check who is responsible for the said alteration.


Alteration - any change of the writing on a check or a post-dated
check. For purposes of this Act, an alteration is only acceptable
when made with the authority of the drawer or of any other party
to the check who is responsible for the said alteration.

Section 4. Checks and Post-date Check with alterations and
erasures, when acceptable. Any check, including post-dated check, which
shows or indicates on its face erasure or alteration of the date, name of the
payee, amount in figures, amount in words, signature/s of the drawer/s, or
the drawer’s signatory/ies, account name, account number, check number,
or MICR characters shall be eligible or acceptable for clearing if a counter-
signature or counter-initial appears on the check to indicate authorization of
the alteration or erasure.

Section 5. Responsibility of Banks and Bank Associations to Clear
Checks and Post-Dated Checks with Alterations. All banks in the
Philippines shall now accept for clearance any check and /or post-dated check
with erasures and alterations on its face, provided that a counter-signature
or counter-initial appears on the check or post-dated check to indicate
authorization of the alteration or erasure. Likewise, bank associations shall
issue a directive to all its member banks to now accept checks and post-dated
checks even with alterations or erasures provided that a counter-signature or
counter-initial appears on the check or post-dated check to indicate
authorization of the alteration or erasure, in accordance with the provisions
of this Act.

Section 6. Due Diligence Required of Banks. Banks shall exercise
extraordinary diligence in probing and verifying the authenticity of the
counter-signature or counter-initial appearing on the check or the post-dated
check which appear to authorize any alteration or erasure therein.

Section 7. Alterations or Erasures, Not Visible “On Its Face”. Any
alteration or erasure on a check which is not visible does not excuse the


Presenting Bank from liability for loss or damage attributable to the
alteration.

Section 8. Applicability of PCHC Memorandum Circular 15-460.
‘The other provisions of PCHC Memorandum Circular 15-460 shall remain in
force except insofar as this Act has overturned the item guidelines which
declared the ineligibility or unacceptability of checks and post-dated checks
with alterations and erasures regardless of signature or initial appearing on
the check that indicates authorization thereof.

Section 6. Repealing Clause. ~ All other laws, presidential decrees,
letters of instructions, executive orders, rules and regulations insofar as they
are inconsistent with this Act, are hereby also repealed or amended as the
case may be.

Section 7. Separability Clause. - In the event that any provision of
this Act or any portion thereof is declared unconstitutional by a competent
court, the other provisions shall not be affected thereby and shall remain valid
and enforceable.

Section 8. Effectivity Clause. - This Act shall take effect after its
complete publication in at least three (3) newspapers of general circulation.

APPROVED.