Republic of the Philippines
HOUSE OF REPRESENTATIVES,
Quezon City

FIFTEENTH CONGRESS

First Regular Session

House Bill No.__ 1619

INTRODUCED BY REPRESENTATIVE ARTHUR C. YAP

EXPLANATORY NOTE

“Prepaid”, is a relatively recent term brought about by technological advancement
and modernization.

Wikipedia, the web-based, free-content encyclopedia, written collaboratively by
Internet users, defines “Prepaid” as referring to services paid for in advance. Examples
include tolls, pay as you go cell phones, and stored-value cards such as gift cards and
preloaded credit cards, Prepaid accounts are assets, and they are increased by debiting the
account(s).

It continues by saying that prepaid services and goods are sometimes targeted to
marginal customers by retailers. Prepaid options can have substantial cost reductions over
postpaid counterparts because they allow customers to monitor and budget usage in
advance.

In the Philippines, the advent of prepayment for goods or services was several
decades ago with the use of “gift certificates”. These certificates were sort of cash
vouchers issued by, purchased from, and accepted as, payment for goods sold in
department stores, supermarkets and other retail establishments. .

Today, the prepaid concept has permeated almost all spectra of commercial
transactions. With the use of the technology of storing of monetary values in common
prepaid cards, goods and services can now be prepaid, including public utility services,
restaurants, cable or satellite television, internet service provider, highway toll fees,
medical and even other professional services.

However, prepaid service providing is most prominent in the telecommunications
sector. In the late 1990°s when the telecom companies suffered from what is then referred
to as “subscription fraud”, resort was made to the use of selling of prepaid cards instead
of the then usual post paid or plan based subscription.

Today, more than 95% of the income of the telecom company giants, arguably the
biggest income eamers in the country, are from prepaid subscribers, Out of the estimated
70 million combined mobile phone subscriber base of the three telecom companies, less
than 2 million are postpaid subscribers,



The adherence to the business model of preference for prepaid subscribers was
confirmed in the Financial Statement for the first quarter of this year of one of the largest
telecom firm in the country. It stated that “The predominance of prepaid service reflects
one of the distinguishing characteristics of the Philippine cellular market. The growth in
our prepaid service has enabled us to increase and broaden our subscriber base rapidly
while controlling credit risk and reducing billing and administrative costs on a per
subscriber basis.”

Unfortunately, while the telecom companies, retail establishments, and other
commercial companies have earned so much from their prepaid subscribers, they
continue to engage in a rather unethical business practice, which is the imposition of
expiration on prepaid cards or gift certificates.

To reiterate, this is an unethical business practice. There is no basis, whatsoever,
for the imposition of the expiration. It is downright cheating the consumers of the
moneys they paid for.

In fact, such practice can also be deemed illegal. The consumers, as buyers, have
paid or gave consideration (in advance) for service or goods to be provided or sold by the
seller-establishment, This is basically a contract of sale, except that the goods or services
were paid in advance. This variation is even very favorable to the merchant establishment
as it has been paid already, even if it still has to deliver the goods or render services.

In such a contract, the seller does have any right to unilaterally decide not to
deliver the goods or provide the services by imposing an expiration of the time the buyer
should get the goods or use the services.

It should never be construed that the buyer purchased the prepaid card or the gift
certificate. This is because such items are worthless. Its value is in the amount of goods
or services such card or certificate can purchase from the merchant.

Sadly however, this business practice continues to pervade.

In one instance, the National Telecommunications Commission, upon a directive
by Congress, increased the shelf life or the expiration of cell phone cards. And it was as if
such act was manna from heaven that the consumers should be very grateful for. It was
like thanking the robber for sparing the life of the victim.

This proposed measure seeks to prohibit the imposition of expiration for all
prepaid cards or devices. It likewise prohibits the refusal of establishments to honor
prepaid devices on the ground of its expiry. And, it seeks to provide for criminal penalties
for esteblishments violating such prohibitions.

This bill is a reform measure aimed at changing the way big business conduct
their enterprise and empowering consumers who long been prey to such incessant greed.

In view of the foregoing, the immediate passage of the bill is eamestly sought.

ARTHUR C. YAP
Representative



Republic of the Philippines
HOUSE OF REPRESENTATIVES,
Quezon City

FIFTEENTH CONGRESS

First Regular Session

House Bill No._ 1619

INTRODUCED BY REPRESENTATIVE ARTHUR C. YAP

AN ACT
PROHIBITING THE IMPOSITION OF EXPIRATION OF
PREPAID CARDS, CERTIFICATES OR OTHER DEVICES OF
PREPAYMENT OF GOODS AND SERVICES, PROVIDING
PENALTIES FOR VIOLATIONS THEREOF, AND FOR OTHER
PURPOSES

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

SECTION 1. Short Title. — This Act shall be known as the “Prepaid Expiration
Prohibition Act of 2010”.

SECTION 2. Declaration of Policy. ~ It hereby declared the policy of the State
to protect and empower consumers, reform the unprincipled business practices of big
establishments,

SECTION 3. Definition of Terms, For purpose of this Act, the following terms
shall mean:

a. Prepaid -- goods and/or services paid for in advance, Provided, that, those
which were granted or availed of without any consideration shall not fall
within this definition.

b. Prepaid Device — is any device, in the form of a card, certificate, coupon,

document, record. code, plate, electronic serial number, identification code or

number, oF ay other proof of payment or means to pay a prepaid good and or



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service, usually with a face value or with memory storage of its monetary
value,
SECTION 4. Prohibition on Imposition of Expiration for Prepaid Cards or
Other Proof of Prepaid Services. Any provision of law to the contrary notwithstanding,
the imposition of an expiration of the date to use a prepaid device is hereby prohibited.
‘The refusal of an establishment to honor a prepaid device due to its expiration shall
likewise be prohibited
SECTION 5. Penalties - Any goods or services provider who shall be found
guilty of violating any of the provisions of this Act shall be punished with:

a. imprisonment ranging from thirty (30) days to six (6) months or fine ranging from
One Thousand Pesos (P1,000,00) to Ten Thousand Pesos (P10,000.00), or both, at
the discretion of the Court;

b. imprisonment ranging from six (6) months and one (1) day to two (2) years or
fine ranging from Twenty Thousand Pesos (P20,000.00) to Fifty Thousand Pesos

(P50,000,00), or both, at the discretion of the Court;

imprisonment ranging from two (2) years and one (1) day to six (6) years, or fine
of ranging from One Hundred Thousand Pesos (P100,000.00) to Five Hundred
Thousand Pesos (P500,000.00), or both, at the discretion of the Court,

If the establishment is a juridical person, the penalty of imprisonment shall be
imposed against the responsible officer.

SECTION 6. Separability Clause. - If any provision of this Act, or any parts
thereof, is declared unconstitutional, the same shall not affect the validity and effectivity
of the other portions.

SECTION 7. Repealing Clause. - All laws, executive orders, presidential
decrees, proclamations, rules, regulations, issuances and enactments of parts thereof
inconsistent with this Act are hereby repealed or modified accordingly.

SECTION 8. ff

+ This Act shal! take effect fifteen (15) days from its

complete publication i

of in a newspaper of general citcutation in

the Philippines, which

re conies earll


APPROVED.