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Republic of the Philippines
HOUSE OF REPRESENTATIVES Tine /
‘Quezon City 8
18% CONGRESS <<,
First Regular Session ,

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HOUSE BILLNo._6143

Introduced by REP. JUNIE E. CUA
Lone District, Quirino

AN ACT
PROVIDING FOR THE
FINANCIAL CONSUMER PROTECTION ACT

EXPLANATORY NOTE

Consumer confidence and trust in the financial system promotes stability,
growth, efficiency and innovation. However, with the rapid development of complex
financial products coupled with the use of advanced technologies, consumer fraud,
abuse and misconduct have increased. Time and again, we hear stories of consumers
putting their life long savings in investment scams or suffering from or facing
collection cases due to over indebtedness. These are just some of the travails
experienced by financial consumers.

Thus, recognizing the role of regulators in ensuring that the rights of each and
every consumer are protected, this bill provides, among others, financial regulators
such as the Bangko Sentral ng Pilipinas, Insurance Commission and the Securities
and Exchange Commission, rulemaking, surveillance and inspection, market
monitoring, enforcement and adjudication powers relative to consumer protection.

In the international arena, the G2o', in February 2011, called on the
Organization for Economic Cooperation and Development (OECD), the Financial
Stability Board (FSB) and other relevant international organizations to develop
common principles on consumer protection in the field of financial services.
Foremost of these principles is that financial consumer protection should be an
integral part of the legal, regulatory and supervisory framework.

Tt is in this light that this bill is being introduced in order to have in place a
comprehensive financial consumer protection regime wherein financial inclusion,
financial education, good governance and effective supervision all come into play
given that consumer protection is a shared responsibility among the regulators,
consumers and other stakeholders.

In view of the foregoing reasons, passage of this measure is earnestly sought.

TE E. CUA

* The Group of Twenty, oF G20, is the central forum for international cooperation on financial and economic issues. It is
composed of the EU and 19 countries, namely Argentina, Australia, Brazil, Canada, China, France, Germany, india, Indonesia,
Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom (UK) and the United States of
‘America (USA\.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City
18% CONGRESS
First Regular Session

HOUSE BILL NO. 6143

__f._ initrodicedbyREPJUNIEECUAT ————“_SCS;S

AN ACT
PROVIDING FOR THE PROTECTION OF FINANCIAL
CONSUMERS
AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the
Philippines in Congress assembled:

Section1. Short Title — This Act shall be known as the “Financial
Consumer Protection Act”.

Section 2. Declaration of Policy — It is the policy of the state to
ensure that appropriate mechanisms are in place to protect the interest of
Financial Consumers under the conditions of transparency, fair and sound
market conduct, and fair, reasonable and effective handling of Financial
Consumer disputes, which are aligned with global best practices. These
mechanisms reinforce their confidence in the financial market and foster the
stability of the Philippine financial system. Towards this end, the State shall
implement measures to protect the following rights of financial consumers:

a. Right to equitable and fair treatment;

b. Right to disclosure and transparency of Financial Products and
Services;

Right to protection of consumer assets against fraud and misuse;

|. Right to data privacy and protection;

Right to complaints handling and redress.

Section 3. Definition of Terms - As used in this Act, the following
terms shall mean or be understood as follows:

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a) “Financial Consumer” - a person or entity who is a purchaser,
lessee, recipient or prospective purchaser, lessor or recipient of
Financial Products or Services. It shall also refer to any natural
person or micro, small or medium-sized enterprise that had or
has current or prospective financial transaction with financial
entities pertaining to Financial Products or Services.


b) “Financial Consumer Complaint” - an expression of
dissatisfaction filed by a Financial Consumers against a Financial
Service Provider relative to a financial product or service in which
a response or resolution is expected.

©) “Financial Products or Services” - financial products or
services which are developed or marketed by a Financial Service
Provider which may include, but are not limited to savings, credit,
insurance, investments, payments, remittances and other similar
products and services. This also includes digital financial services
which pertain to the broad range of financial services accessed
and delivered through digital channels.

d) “Financial Regulators” - The implementing government
agencies of this Act, namely, the Bangko Sentral ng Pilipinas
(BSP), Securities and Exchange Commission (SEC), Insurance
Commission (IC) and the Cooperative Development Authority
(cpa).

e) “Financial Service Provider” — a person, natural or juridical
which provides financial products or services and are being
supervised or regulated by any of Financial Regulators
enumerated in this Act. This term shall include Investment
Advisers as defined under Section 7 of this Act.

e) “Marketing” - The act of communicating, offering, promoting,
advertising or delivering of Financial Products and Services by
Financial Service Providers.

f) “Micro, Small or Medium-sized Enterprise (MSME)” -
any business activity or enterprise engaged in industry, agri-
business and/or services whether single _ proprietorship,
cooperative, partnership or corporation as defined under R.A. No.
9501, as amended or the Magna Carta for Micro, Small or
Medium-sized Enterprise . Such definition shall be subject to
review and adjustment by the Magna Carta for Micro, Small or
Medium-sized Enterprise (MSMED) Council.

Section 4. Scope and Coverage ~ This Act applies to all Financial
Products and Services offered or marketed by any Financial Service Provider.

Section 5. Financial Regulators - The BSP, SEC and IC shall
enforce the provisions of this Act on all Financial Service Providers they
supervise or regulate by virtue of their respective charters, special laws and
amendments thereto. The CDA shall be considered an implementing
government agency of this Act only with respect to cooperatives offering
financial services such as but not limited to savings and credit except
insurance cooperatives which shall be under the jurisdiction of the IC for
purposes of this Act.


Section 6. Powers of the Financial Regulators. — Financial
Regulators shall have the following powers:

A. Rulemaking - Financial Regulators shall have the
authority to formulate their own standard and rules for the
application of the provisions of this Act to the specific
Financial Products or Services within their jurisdiction
guided by internationally accepted standards and practices.
Financial Regulators may also determine reasonableness of
charges or fees which a Financial Service Provider may
demand, collect or receive for any service or product offered
to consumers, except interest rates which shall be governed
by the Usury Law. Likewise, they may issue their respective
rules of procedure concerning administrative actions arising
from the implementation of this Act.

B. Surveillance and Examination - Financial Regulators
may conduct off-site surveillance and on-site examination on
their respective supervised Financial Service Providers to
ascertain that the provisions of this Act are complied with.
The examination for Financial Consumer protection
compliance may be conducted separately from examination
of prudential regulations compliance. The provisions on the
conduct of examination and surveillance provided in the
respective charters of Financial Regulators, and pertinent
special laws shall be made applicable in the examination and
surveillance under this Act.

The department heads and the examiners of the Financial
Regulators shall be authorized to administer oaths to any
director, officer, or employee of the supervised Financial
Service Providers subject to their examination, and to
compel the presentation of all books, documents, papers, or
records necessary in their judgment to ascertain the facts
relative to the compliance of Financial Service Providers to
this Act.

The supervised Financial Service Provider shall afford to its
respective Financial Regulator full opportunity to examine
its records, and review its systems and procedures at any
time during business hours when requested to do so by the
Financial Regulator.

C. Market Monitoring — Financial Regulators shall have the
authority to require their respective supervised Financial
Service Providers and their third party agents/service
providers to submit reports or documents, as needed, and to
access relevant data about financial products, services and
markets from other government agencies in connection with
market monitoring.


D. Enforcement - the Financial Regulators shall have the
authority to impose enforcement actions on their respective
supervised Financial Service Providers for non-compliance
with this Act. Such enforcement actions may include, but are
not limited to, the following:

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7 1. Restriction on the ability of the supervised Financial

8 Service Provider to continue to collect fees or charges in

9 cases of excessive fees or charges imposed by the Financial
10 Service Provider, except interest rates which shall be
1 governed by the Usury Law;

12 2. Disqualification and/or suspension of directors, officers or
B employees of the supervised Financial Service Provider
4 responsible for violations of the provisions of this Act, its
15 implementing regulations, or orders of the Financial
16 Service Providers;

v7 3. Imposition of fines, suspension, or penalties for any non-
18 compliance with or breach of this Act, its implementing
19 regulations, or orders of the Financial Service Providers;
20 4. Issuance of a cease and desist order to the Financial Service
21 Provider without the necessity of a prior hearing if in the
2 Financial Regulator’s judgment, the act or practice, unless
23 restrained, amounts to fraud or a violation the provisions
24 of this Act and its implementing regulations or may
25 unjustly cause grave or irreparable injury or prejudice to
26 Financial Consumers.
27 The Financial Service Provider shall be afforded an
28 opportunity to defend its act or practice in a summary
29 hearing before the Financial Regulator or its designated
30 body, upon request made by the Financial Service Provider
31 within five (5) calendar days from its receipt of the order. If
32 no such hearing is requested within said period, the order
33 shall be final. If a hearing is requested by the Financial
34 Service Provider, the proceedings shall be conducted
35 summarily without adhering to the technical rules of
36 evidence, and all issues shall be determined primarily on
37 the basis of records, after which the Financial Regulator
38 may either reconsider or make final its order;

39 5. Suspension of operation of any supervised Financial
40 Service Provider in relation to a particular Financial
a Product or Service when in the Financial Regulator’s
a2 judgment based on findings, the Financial Service Provider
43 is operating in violation of the provisions of this Act and its

4a implementing regulations.


adjudicate all actions arising from or in connection with
financial transactions that are purely civil in nature and the
claim or relief prayed for by the Financial Consumer is solely
for payment or reimbursement of sum of money not exceeding
the amount of P100,000.00 or as may be prescribed by the
Financial Regulators. The decision of the Financial Regulators
in the adjudication shall be final and executory, and may not be
restrained or set aside by the court except on petition for
certiorari on the ground of lack or excess of jurisdiction of the
Financial Regulators. The petition for certiorari may only be
filed within ten (10) days from receipt by the aggrieved party of
the decision. The adjudicatory power shall be exercised by the
Head of the concerned Financial Regulator or a duly authorized
officer or body, Provided, that in case of BSP, the decision of
the authorized officer or body is not appealable to the Monetary
Board.

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e Adjudication - Financial Regulators shall have the authority to
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Financial Regulators may order the payment or
reimbursement of money which is subject of the action filed
before them. The Financial Regulators, in the exercise of their
adjudicatory powers, shall have the power to issue subpoena
duces tecum and summon witnesses to appear in its proceedings
and in appropriate cases, order the examination, search and
seizure of all documents, and books of accounts of any entity or
person under investigation as may be necessary for the proper
disposition of the cases before them. Further, Financial
Regulators shall have the authority to punish for contempt, both
direct and indirect, in accordance with the pertinent provisions
of and penalties prescribed by the Rules of Court.

. Other Powers - Financial Regulators may exercise such other
powers as may be provided by their enabling laws or charters as
well as those which may be implied from, or which are
necessary or incidental to the carrying out of, the express
powers granted the Financial Regulators to achieve the
objectives and purposes of these laws.

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Section 7. Investment Adviser ~ Investment Advisers shall be
subject to the rules and regulation to be issued by the SEC.

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Investment Adviser shall mean any person who, for compensation,

engages in the business of advising others, either directly or through
publications or writings, as to the value of investment products or as to the
advisability of investing in, purchasing, or selling investment products, or

promulgates analyses or reports concerning investment products; but does
not inch

i compensation and as part of a regular business, issues or
le the following:

a) Trust Department/Unit of Banks;


b) Lawyer, accountant, engineer, or teacher whose performance of
such services is solely incidental to the practice of his profession;

) Any investment banker or broker dealer whose performance of such
services is solely incidental to the conduct of his business as such
investment banker or broker dealer and who receives no special
compensation therefor;

d) The publisher of any bona fide newspaper, news magazine or
business or financial publication of general and regular circulation;

e) Such other persons as the SEC may designate by rules and
regulations or order.

Section 8. Duties and responsibilities of Financial Service

Providers -

A. Board and Senior Management Oversight — The Board of
Directors (BOD) and Senior Management of Financial Service
Providers shall oversee the implementation of the Compliance
Management System (CMS) of Financial Service Providers that
effectively ensures conformity with this Act and shall provide the
means by which Financial Service Providers shall identify, measure,
monitor and control consumer protection risks inherent in its
operations.

B. Appropriate product design and delivery - Financial Service
Providers shall continuously evaluate their Financial Products and
Services to ensure that they are appropriately targeted to the needs,
understanding and capacity of both their markets and their clients.
This shall include, among others, the following:

1. Affordability and suitability assessments — Financial
Service Providers should have written procedures for
determining whether a particular Financial Consumer
product or service is suitable and affordable for a client.
This shall include determination of whether the amount
and terms of the offered financial product or service allow a
client, in terms of the individual ability, to meet the
obligations with a low probability of a serious hardship and
reasonable prospect that the Financial Product or Service
will provide value to its client. For the purpose of extending
credit, this assessment will include measures to prevent
over-indebtedness.

2. Cooling-off period -Financial Service Providers are
expected to adopt a clear cooling-off policy, as may be
prescribed by law or by rules and regulations issued by the
relevant Financial Regulator upon its determination that a
cooling-off period is necessary for a particular product

6


subject of regulation by such Financial Regulator. Such
policy should, among others, provide a client with a
cooling-off period that will allow a client to consider the
costs and risks of a Financial Product or Service, free from
the pressure of the sales team of the Financial Service
Provider. The length of the cooling-off period should be
individually determined by Financial Service Providers
based on reasonable expectation of the time required for a
client to fully evaluate all the terms and risks of the
Financial Products or Service and contact concerned
parties who may be affected by its terms and conditions,
unless a minimum or fixed period is required by the
Financial Regulator for compliance by the Financial Service
Provider or to be incorporated in the terms of the Financial
Product or Service. Short period transaction or contracts
may be allowed to have no cooling-off period which shall
be provided in the regulation by the Financial Regulators.

During the cooling-off period, the Financial Consumer may
cancel or return the contract without penalty; however,
nothing herein prevents the Financial Service Providers
from recovering the processing fees incurred. The
Financial Service Providers are prohibited from engaging
in practices that unreasonably burden the Financial
Consumer in the exercise of the right of cancellation during
the cooling-off period. If the financial product is a contract
of insurance, the right of return cannot be exercised after
the Financial Consumer has made a claim under the
contract of insurance.

3. Prepayment of loans and other credit accommodations -a
borrower may, at any time prior to the agreed maturity
date prepay, in whole or in part, Provided that any cost or
fees charged to the borrower for such pre-payment shall be
disclosed as required under the succeeding provision of
this Section on transparency, disclosure and responsible
pricing.

C. Transparency, disclosure and responsible pricing - Financial
Service Providers must ensure that they adopt disclosure principles
in their communications with Financial Consumers that will include
the use of clear and concise language understood by the target
clients. This must also include updated and accurate disclosure of
information such as, pricing or any cost associated with the product
or service that should be made in a consistent manner to facilitate
comparison between similar Financial Products and Services across
the industry.

Sufficient product disclosure must be provided before the
contracting of the product or service to give the client enough basis


and time for review. Any change in the terms of conditions of a
product or service shall be provided to the client.

In their advertising materials, Financial Service Providers shall
disclose the contact information of their consumer assistance unit
providing consumer assistance and handling Financial Consumer
Complaints. Financial Service Providers shall also disclose that
they are regulated and the advertising materials must identify the
relevant Financial Regulator.

Financial Service Providers are legally responsible for all statements
made in the marketing and sales materials that they produce
related to their products. Disclosure of information on Financial
Products or Services shall be made available to the public by the
Financial Service Provider through printed materials, mass media,
websites or digital platforms.

Responsible pricing — in addition to the requirements of R.A. No.
3765 or The Truth In Lending Act, Financial Service Provides are
required to document the reasons for setting the price of each
financial product or service. Where the pricing procedures of a
Financial Service Provider are inadequate or unreasonably high, the
concerned Financial Regulator shall impose appropriate corrective
actions.

. Fair and respectful treatment of clients — Financial Service

Providers shall have the right to select their clients, Provided, that
the selection and treatment of their clients shall not involve
discrimination on the basis of a person’s race, ethnicity, origin,
gender, disability, sexual orientation, religious affiliation or political
affiliation, Provided further, that Financial Service Providers are
not precluded from instituting the necessary risk mitigating
measures.

Privacy and protection of client data - each Financial Service
Provider must respect the privacy and protect the data of their
clients. Consistent with the provisions of the Data Privacy Act, the
Financial Regulators shall issue regulations governing the
disclosure of client data to a third party.

Clients have the right to review their client data to ensure that
inaccurate or deficient data is corrected or amended.

Financial consumer protection assistance mechanism — Each
Financial Service Provider must establish a single consumer
assistance unit to render free assistance to Financial Consumers on
financial transactions concerns. This shall include handling of
complaints, inquiries and requests.

Financial Consumers who are unsatisfied with the Financial Service
Provider's handling of their complaints, inquiries and requests, may


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elevate their concerns to the Financial Regulator that supervises the
Financial Service Provider concerned.

Section 9. Bundling of Products ~ When a borrower is obliged by
the Financial Service Provider to purchase any product, including an
insurance policy, as a pre-condition for receiving a loan from the Financial
Service Provider, the borrower should be free to choose the provider of the
product and this information should be known to the borrower.

Section 10. Training — Staff of Financial Service Providers who deal
directly with Financial Consumers must receive adequate training, suitable for
the complexity of the products or services they sell. Financial Service
Providers must be qualified as appropriate for the complexity of the financial
product or service they sell.

Section 11. No waiver of rights — No provision of a contract for a
Financial Product or Service shall be lawful or enforceable if such provision
waives or otherwise deprives a client of a legal right to sue the Financial
Service Provider, receive information, have their complaints addressed and
resolved, have their non-public client data protected or cancel the use of the
Financial Product or Service without an unreasonable penalty.

Section 12. Non-exemption from compliance — Notwithstanding
any prior stipulation in a contract, financial entities shall not be exempted
from compliance with the provisions of this Act, or deprive Financial
Consumers of their rights under this act.

Section 13. Liability of a Financial Service Provider on the
acts or omissions of its authorized representatives — The Financial
Service Provider shall be responsible for the acts or omissions of its directors,
officers, employees or agents, in marketing and transacting with Financial
Consumers of its Financial Products and Services.

Section 14. Prescription — All actions or claims accruing under the
provisions of this Act and the rules and regulations issued pursuant thereto
shall prescribe within five (5) years from the time the Financial Consumer
transaction was consummated, or within five (5) years from the discovery of
deceit or non-disclosure of material facts. For insurance contracts, the
prescriptive period for the commencement of action provided under the
Tnsurance Code shall apply.

Section 15. Penalty for Violation of this Act —- Whenever a
Financial Service Provider willfully violates any provision of this Act or any
related rules, regulations, orders or instructions, issued by the Financial
Regulators, the person or persons responsible for such violation shall be
punished by imprisonment of not less than one (1) year but not more than five
(5) years, or by a fine of not less than Fifty thousand (P50,000.00) pesos but


not more than Two Million Pesos (P2,000,000.00), or both, at the discretion
of the court. In addition, in case profit is gained or loss is avoided as a result
of the violation, a fine of no more than three (3) times the profit gained or loss
avoided may also be imposed.

Section 16. Administrative Sanctions - The provisions on
administrative sanctions of the respective charters of the Financial Regulators
shall be made applicable to any Financial Service Provider, its directors,
officers, employees or agents without prejudice to the enforcement actions
provided under Section 6 (D) of this Act and the criminal sanctions provided
under Section 15 of this Act, for any willful violation of this Act or any related
tules, regulations, orders or instructions of the Financial Regulators,
Provided, That in addition to the administrative sanctions that may be
imposed, the authority of the Financial Service Provider to operate in relation
to a particular Financial Products or Services may be suspended or cancelled
by the Financial Regulator.

Section 17. Repealing clause — All laws, executive orders, rules
and regulations or parts thereof which are inconsistent with this Act are
hereby repealed or amended accordingly. Articles 131 to 147 of Title IV of
Republic Act No. 7394 are hereby repealed.

ction 18. Transitory provision — The Financial Regulators shall
prepare the necessary rules and regulations to implement the provisions of
this Act within one (1) year from its effectivity.

ction 19. Effectivity clause — This Act shall take effect fifteen

(ag) days after its publication in the Official Gazette or in at least two (2)
national newspapers of general circulation.

Approved.

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