Republic of the Philippines $ 4,
HOUSE OF REPRESENTATIVES / .” RECEIVED
Quezon City LS aie, 04 JUL 2017
Seventeenth Congress :
First Regular Session =
4 we
HOUSE OF REP! ‘ATIVES Nor
HB.No, BOGS.

Introduced by Representative H. Harry L. Roque Jr

EXPLANATORY NOTE

Every technological breakthrough changes the procedure in transacting business. The
payment of bills, whether it be for utilities, groceries, gasoline, medicine, or any other item, can
now be made through a credit card, automated teller machine card, or by telephone.

The use of electronic systems to transfer funds has provided substantial benefits to
consumers. However, due to the characteristics of such systems, the application of existing
consumer protection legislation is unclear. The rights and liabilities of consumers, financial

institutions, and intermediaries in electronic fund transfers are undefined.

This bill seeks to establish the rights, liabilities, and responsibilities of participants in

yy

H. HARRY L, ROQUE JR.

electronic fund transfer systems.”

* This bill was originally filed by Senator Miriam Defensor Santiago during the Sixteenth Congress, First Regular
session.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Seventeenth Congress
First Regular Session

HOUSE OF REP! ‘ATIVES
H.B.No. bebo

Introduced by Representative H. Harry L. Roque Jr

AN ACT
DEFINING THE RIGHTS AND LIABILITIES OF PARTIES IN
ELECTRONIC FUND TRANSFERS

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled:
SECTION 1. Short Title. - This Act shall be known as the “Electronic Fund Transfer

Act”

SECTION 2. Declaration of Policy. - It is the policy of the State to promote commercial
transactions. Toward this end, the State shall enact measures to protect the rights and define the

liabilities of parties in commercial transactions.

SECTION 3. Definitions. - As used in this Act, the term—
(A) “Accepted card or other means of access” means a card code or other means of
access to a consumer's account for the purpose of initiating electronic fund transfers when the

person, to whom such card or other means of access was issued, has requested and received, or


has signed or has used, or authorized another to use, such card or other means of access for the
Purpose of transferring money between accounts or obtaining money, property, labor, or
services;

(B) “Account” means a demand deposit, savings deposit, or other asset account (other
than an occasional or incidental credit balance in an open end credit plan), as described in
regulations of the Board, established primarily for personal, family, or household purposes, but
such term does not include an account held by a financial institution pursuant to a bona fide trust
agreement;

(C) “Board” means the Board of Governors of the Bangko Sentral ng Pilipinas;

(D) “Business day” means any day on which the offices of the consumer's financial
institution involved in an electronic fund transfer are open to the public for carrying on
‘substantially all of its business functions,

(E) “Consumer” means a natural person;

(F) “Electronic fund transfer” means any transfer of funds, other than a transaction
originated by check, draft, or similar paper instrument, which is initiated through an electronic
terminal, telephonic instrument, or computer or magnetic tape so as to order, instruct or authorize
@ financial institution to debit or credit an account. Such term includes direct deposits or
withdrawals of funds, and transfers initiated by telephone.

‘Such term does not include-
(1) any check guarantee or authorization service which does not directly result
in a debit or credit to a consumer's account,
(2) any transfer of funds, other than those processed by automated
clearinghouses, made by a financial institution on behalf of a consumer by


(G)

@G)

(4)

(5)

means of a service that transfers funds held at cither banks or other
depository institutions and which is not designed primarily to transfer
funds on behalf of a consumer,

‘any transaction the primary purpose of which is the purchase or sale of
securities or commodities through a broker-dealer registered with or
regulated by the Securities and Exchange Commission,

any automatic transfer from a savings account to a demand deposit
account pursuant to an agreement between a consumer and a financial
institution for the purpose of covering an overdraft or maintaining an
agreed upon minimum balance in the consumer's demand deposit account,
or

any transfer of funds which is initiated by a telephone conversation
between a consumer and an officer or employee of a financial institution
which is not pursuant to a pre-arranged plan and under which periodic or
recurring transfers are not contemplated;

“Electronic terminal” means an electronic device, other than a telephone operated

by a consumer, through which a consumer may initiate an electronic fund transfer. Such term

includes, but is not limited to, point-of-sale terminals, automated teller machines, and cash

dispensing machines,

(H)

“Financial institution” means a bank, a savings and loan association, a mutual

savings bank, a credit union, or any other person who, directly or indirectly, holds an account

belonging to a consumer,


(1) “Pre-authorized electronic fund transfer” means an electronic fund transfer

authorized in advance to recur at substantially regular intervals,

(Q) “Unauthorized electronic fund transfer” means an electronic fund transfer from a

consumer's account initiated by a person other than the consumer without actual authority to

initiate such transfer and from which the consumer receives no benefit, but the term does not

include any electronic fund transfer—

q)

(Q2)

G)

initiated by a person other than the consumer who was furnished with the
card, code, or other means of access to such consumer’s account by such
consumer, unless the consumer has notified the financial institution
involved that transfers by such other person ax no longer authorize:
initiated with fraudulent intent by the consumer or any person acting in
conceit with the consumer, or

which constitutes an error committed by a financial institution,

SECTION 4. Regulations. ~

(A) The Board shall prescribe regulations to carry out the purposes of this Act. In

prescribing such regulations, the Board shall

ay

(2)

consult with the other affected agencies and take into account and allow
for, the continuing evolution of electronic banking services and the
technology utilized in such services.

prepare an analysis of economic impact which considers the costs and
benefits to financial institutions, consumers, and other users of electronic

fund transfers, including the extent to which additional documentation,


G3)

reports, records, or other paper work would be required, and the effects

upon competition in the provision of electronic banking services among

large and small financial institutions and the availability of such services

to different classes of consumers, particularly low income consumers,

to the extent practicable, the Board shall demonstrate that the consumer

protections of the proposed regulations outweigh the compliance costs

imposed upon consumers and financial institutions; and

(a)

(b)

(c)

Any proposed regulations and accompanying analyses shall be sent
promptly to Congress by the Board.

‘The Board shall issue model clauses for optional use by financial
institutions to facilitate compliance with the disclosure
requirements of the following section and to aid consumers in
understanding the rights and responsibilities of participants in
electronic fund transfers by utilizing readily understandable
language. With respect to the disclosures required by Section 5, the
Board shall lake account of variations in the services and charges
under different electronic fund transfer systems and, as
appropriate, shall issue alternative model clauses for disclosure of
these differing account terms.

Regulations prescribed hereunder may contain such classifications,
differentiations, or other provisions, and may provide for such
adjustments and exceptions for any class of electronic fund

transfers, as, in the judgment of the Board, are necessary or proper


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SB

(d)

to effectuate the purposes of this Act, to prevent circumvention or
evasion thereof, or to facilitate compliance therewith, This Board
shall by regulation modify the requirements imposed by this Act
‘on small financial institutions if the Board determines that such
modifications are necessary to alleviate any undue compliance
burden on small financial institutions and such modifications are
consistent with the purpose and objective of this subchapter.

In the event that electronic fund transfer services are made
available to consumers by a person other than a financial
institution holding a consumer's account, the Board shall by
regulation assure that the disclosures, protections, responsibilities,
and remedies created by this Act are made applicable to such

persons and services.

SECTION 5. Terms and Conditions of Transfers. -

(A) The terms and conditions or electronic fund transfers involving a consumer's

account shall be disclosed at the time the consumer contracts for an electronic fund transfer

service, in accordance with regulations of the Board. Such disclosures shall be in readily

understandable language and shall include, to the extent applicable ~

a)

the consumer's liability for unauthorized electronic fund transfers and, at

the financial institution's option, notice of the advisability of prompt

reporting of any loss, theft, or unauthorized use of a card, code, of other

means of access;


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GB)

(4)

(5)

(6)

(7)

(8)
(9)

the telephone number and address of the person or office to he notified in
the event the consumer believes that an unauthorized electronic fund
transfer has been or may be effected;

the type and nature of electronic fund transfers which the consumer may
initiate, including any limitations on the frequency or dollar amount of
such transfers, except that the details of such limitations need not be
disclosed if their confidentiality is necessary to maintain the security of an
electronic fund transfer system, as determined by the Board;

any charges for electronic €und transfers or for the right to make such
transfers,

the consumer's right to stop payment of a preauthorized electronic fund
transfer and the procedure to initiate such a stop payment order;

the consumer's right to receive documentation of electronic fund transfers
under Section 6;

‘a summary, in a form prescribed by regulations of the Board, of the error
resolution provisions of section 8 and the consumer's rights thereunder,
‘The financial institution shall thereafter transmit such summary at least
‘once per calendar year,

the financial institution's liability to the consumer under Section 10; and
under what circumstances the financial institution will, in the ordinary
course of business, disclose information concerning the consumer's

account to third person


(B) A financial institution shall notify a consumer in writing at least twenty-one (21)
days prior to the effective date of any change in any term or condition of the consumer's account
required to be disclosed under subsection (1) of this section if such change would result in
greater cost or liability for such consumer or decreased access to the consumer's account. A
financial institution may, however, implement a change in the terms or conditions of an account
without prior notice when such change is immediately necessary to maintain or restore the
security of an electronic fund transfer system or a consumer's account. Subject to subsection (A)
(3) of this section, the Board shall require subsequent notification if such a change is made
permanent.

(C) For any account of a consumer made accessible to electronic fund transfers prior
to the defective date of this Act, the information required to be disclosed to the consumer under
subsection (A) of this section shall be disclosed not later than the earlier of -

(1) the first periodic statement required by section 6 after the effective date of
this Act; or
(2) thirty (30) days after the effective date of this Act.

SECTION 6. Documentation of Transfers, -

(A) For each electronic fund transfer initiated by a consumer from an electronic
terminal, the financial institution holding such consumer's account shall, directly or indirectly, at
the time the transfer is initiated, make available to the consumer written documentation of such
transfer. The documentation.shal! clearly set forth to the extent applicable -

(1) the amount involved and the date the transfer is initiated;

(2) the type of transfer,


(3) the identity of the consumer's account with the financial institution from.
which, or to which, funds are transferred,

(4) the identity of any third party to whom or from whom the funds are
transferred; and

(5) _ the location or identification of the electronic terminal involved.

(B) For a consumers account which is scheduled to be credited by a pre- authorized
electronic fund transfer from the same payor at least once in cach successive sixty-day period,
except where the payor provides positive notice of the transfer to the consumer, the financial
institution shall elect to provide promptly either positive notice to the consumer when the credit
is made as scheduled, or negative notice to the consumer when the credit is not made as
scheduled, in accordance with regulations of the Board. The means of notice elected shall be
disclosed to the consumer in accordance with section 5 of this Act.

(C) A financial institution shall provide each consumer with a periodic statement for
each account of such consumer that may be accessed by means of an electronic fund transfer.
Except as provided in subsection (D) and (E) of this section, such statement shall be provided at
least monthly for each monthly or shorter cycle in which an electronic fund transfer affecting the
account has occurred, or every thee (3) months, whichever is more frequent. The statement,
which may include information regarding transactions other than electronic fund transfers, shall
clearly set forth ~

(1) with regard to each electronic fund transfer during the period, the
information described in subsection (A) of this Section, which may be

provided on an accompanying document:


w

(2) the amount of any fee or charge assessed by the financial institution during
the period for electronic fund transfers or for account maintenance;

(3) the balances in the consumer's account at the beginning of the period and
at the close of the period; and

(4) the address and telephone number to be used by the financial institution
for the purpose of receiving any statement inquiry or notice of account
error from the consumer. Such address and telephone number shall be
preceded by the caption “Direct Inquiries to:” or other similar language
indicating that the address and number are to be used for such inquiries or
notices.

(D) In the case of a consumer’s passbook account which may not be accessed by
electronic fund transfers other than pre-authorized electronic fund transfers crediting the account,
financial institution may, in lieu of complying with the requirements of subsection (C) of this
section, upon presentation of the passbook, provide the consumer in writing with the amount and
date of each such transfer involving the account since the passbook was last presented.

(E) In the case of consumer's account, other than a passbook account, which may not
be accessed by electronic fund transfers other than pre-authorized electronic fund transfers
crediting the account, the financial institution may provide a periodic statement on a quarterly
basis which otherwise complies with the requirements of subsection (C) of this Section.

(F) In any action involving a consumer, any documentation required by this section to
be given to the consumer which indicates that an electronic fund transfer was made to another
person shall he admissible as evidence of such transfer and shall constitute prima facie proof that
such transfer was made.


SECTION 7. Pre-authorized Transfers. -

(A) A preauthorized electronic fund transfer from a consumer's account may be
authorized by the consumer only in writing, and a copy of such authorization shall be provided to
the consumer when made. A consumer may stop payment of pre-authorized electronic fund
transfer by notifying the financial institution orally or in writing at any time up to three (3)
business days preceding the scheduled date of such transfer. The financial institution may require
written confirmation to be provided to it within fourteen (14) days of an oral notification if, when
the oral notification is made, the consumer advised of such requirement and the address to which
such confirmation should be sent.

(B) In the case of pre-authorized transfers from a consumer's account to the same
person which may vary in amount, the financial institution or designated payee shall, prior to
each transfer provide reasonable advance notice to the consumer, in accordance with regulations
of the Board, of the amount to be transferred and the scheduled date of the transfer.

SECTION 8. Error Resolution. -

(A) _ If a financial institution, within sixty (60) days after having transmitted to a
consumer documentation pursuant to this Act, receives oral or written notice in which the
consumer

(1) sets forth or otherwise enables the financial institution to identify the name

and account number of the consumer,


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(2) _ndicates the consumer's belief that the documentation, or, in the case of
notification pursuant to Section 6, the consumer's account, contains an
error and the amount of such error; and

(3) sets forth the reasons for the consumer's belief (where applicable) that an
error has occurred, the financial institution shall investigate the alleged
error, determine whether an error has occurred, and report or mail the
results of such investigation and determination to the consumer within ten
(10) business days. The financial institution may require written
confirmation to be provided to it within ten (10) business days of an oral
notification of error if, when the oral notification is made, the consumer is
advised of such requirement and the address to which such confirmation
should he sent. A financial institution which requires written confirmation
in accordance with the previous sentence need not provisionally re-credit a
consumer's account in accordance with subsection (C) of this section, nor
shall the financial institution be liable under subsection (E) of this section
if the written confirmation is not received within the ten-day period
referred to in the previous sentence.

(B) If the financial institution determines that an error did occur, it shall promptly,
but in no event more than one (1) business day after such determination, correct the error, object
to Section 9, including the crediting of interest where applicable,

(C) If. financial institution receives notice of an error in the manner and within the
time period specified in subsection (A) of this Section, it may, in lieu of the requirements of

subsections (A) and (B) of this Section, within ten (10) business days after receiving such notice


provisionally re-credit the consumer's account for the amount alleged to be in error, subject to
Section 9, including interest where applicable, pending the conclusion of its investigation and its
determination of whether an error has occurred. Such investigation shall be concluded not later
than forty-five (45) days after receipt of notice of the error. During the pendency of the
investigation, the consumer shall have full use of the funds provisionally re-credited.

(D) If the financial institution determines after its investigation pursuant to 0
‘subsection (A) or (C) of this section that an error did not occur, it shall deliver or mail to the
consumer an explanation of its findings within three (3) business days after the conclusion of its
investigation, and upon the request of the consumer promptly deliver or mail to the consumer
reproductions of all documents which the financial institution relied on to conclude that such
error did not occur, The financial institution shall include notice of the right to request
reproductions with the explanation of its findings.

(EB) Ifany action under this Act, the court finds that -

(1) the financial institution did not provisionally re-credit a consumer's
account within the ten-day period specified in subsection (C) of this
section, and the financial institution (a) did not make a good faith
investigation of the alleged error, or (b) did not have a reasonable basis for
believing that the consumer's account was not in error; or

(2) the financial institution knowingly and willfully concluded that the
consumer's account w as not in error when such conclusion could not
reasonably have been drawn from the evidence available to the financial
institution at the time of its investigation, then the consumer shall be

entitled to treble damages,


(F) For the purpose of this section, an error consists of -

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Q)

(4)
(3)

(6)

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an unauthorized electronic fund transfer,

an incorrect electronic fund transfer from or to the consumer's account,
the omission from a periodic statement of an electronic fund transfer
affecting the consumer's account which should have been included;

a. computational error by the financial institution;

the consumer's receipt for an incorrect amount of money from an
electronic terminal;

a consumer's request for additional information or clarification concerning
an electronic fund transfer or any documentation required by this Act; or

any other error described in regulations of the Board

SECTION 9. Consumer Liability.

(A) A consumer shall he liable for any unauthorized electronic fund transfer involving

the account of such consumer only if the card or other means of access utilized for such transfer

was an accepted card or other means of access and if the issuer of such card, code, or other

means of access has provided a means whereby the user of such card, code, or other means of

access can be identified as the person authorized to use it, such as by signature, photograph or

fingerprint, or by electronic or mechanical confirmation. In lesser of-

a)
(2)

(One Thousand Pesos (P 1,000.00); or
The amount of money or value of property or services obtained in such
unauthorized electronic fund transfer prior to the time the financial

institution is notified of or otherwise becomes aware of, circumstances


which lead to the reasonable belief that an unauthorized electronic fund
transfer involving the consumer's account has been or may be effected.
Notice under this paragraph is sufficient when such steps have been taken
as may be reasonably required in the ordinary course of business to
provide the financial institution with the pertinent information, whether or
not any particular officer, employee, or agent of the financial institution
does in fact receive such information. Notwithstanding the foregoing,
reimbursement need not be made to the consumer for losses the financial
institution establishes would not have occurred but for the failure of the
consumer to report within sixty (60) days of transmittal of the statement
(or in extenuating circumstances such as extended travel or
hospitalization, within a reasonable time under the circumstances) any
unauthorized electronic fund transfer or account error which appears on
the periodic statement provided to the occurred but for the failure of the
consumer to report any loss or theft of a card or other means of access
within two (2) business days after the consumer learns of the loss or theft
(or in extenuating circumstances such as extended travel or
hospitalization, within a longer period which is reasonable under the
circumstances), but the consumer's liability under this subsection in any
such case may not exceed a total of Ten Thousand Pesos (10,000.00) or
the amount of unauthorized electronic fund transfers which occur

following the close of two (2) business days (or such longer period) after


v

the consumer learns of the loss or theft but prior to notice to the financial
institution under this subsection, whichever is less.

(B) __ Inany action which involves a consumer's liability for an unauthorized electronic
fund transfer, the burden of proof is upon the financial institution to show that the electronic fund
transfer was unauthorized, then the burden of proof is upon the financial institution to establish
that the conditions of liability set forth in subsection (B) of this Section have been met, and, if
the transfer was initiated after the effective date of this Act, that the disclosures required to be
made to the consumer under Section 5 were in fact made in accordance with such section.

(C) In the event of a transaction which involves both an unauthorized electronic fund
transfer and an extension of credit to an agreement between the consumer and the financial
institution to extend such credit to the consumer in the event the consumer's account is
overdrawn, the limitation on the consumer's liability for such transaction shall be determined
solely in accordance with this section.

(D) Nothing in this section imposes liability upon a consumer for an authorized
electronic fund transfer in excess of his liability for such a transfer under other applicable law or
under any agreement with the consumer’s financial institution

(E) Except as provided in this Section, a consumer incurs no liability from an
unauthorized electronic fund transfer.

SECTION 10. Liability of Financial Institutions. -
(A) Subject to subsections (B) and (C) of this Section, a financial institution shall

be liable to a consumer for all damages proximately caused by -


v

a)

Q@)

G)

the financial institution's failure to make an electronic fund transfer, in

accordance with the terms and conditions of an account, in the correct

‘amount or in a timely manner when properly instructed to do so by the

consumer, except where -

(a) the consumer's account has insufficient funds;

(b) the funds are subject to legal process or other encumbrance

(c) such transfer would exceed an established credit limit,

(d) an electronic terminal has insufficient cash to complete the
transaction; or

(e) as otherwise provided in regulations of the Board.

the financial institution's failure to make an electronic fund transfer due to

insufficient funds when the financial institution failed to credit, in

accordance with the terms and conditions of an account, a deposit of funds

to the consumer’s account which would have provided sufficient funds to

make the transfer.

The financial institution's failure to stop payment of a pre-authorized

transfer from a consumer's account when instructed to do so in accordance

with the terms and conditions of the account

A financial institution shall not be liable under subsection (B) (1) or (2) of this

Section if the financial institution shows by a preponderance of the evidence that its action or
failure to act resulted from -


(1) an act of God or other circumstance beyond its control, that it exercised
reasonable care to prevent such a3! occurrence, and that it exercised such
diligence as the circumstances required; or

(2) a technical malfunction which was known to the consumer at the time he
attempted to initiate an electronic fund transfer or, in the case of a
preauthorized transfer, at the time such transfer should have occurred.

(C) Inthe case of a failure described in subsection (A) of this Section which was not
intentional and which resulted from a bona fide error, notwithstanding the maintenance of
procedures reasonably adopted to avoid any such error, the financial institution shall be liable for
actual damages proved.

SECTION 11. Issuance of Cards or Other Means of Access. -
(A) No person may issue to a consumer any card, code, or other means of access to
such consumer's account for the purpose of initiating an electronic fund transfer other than -
(1) __ inresponse to a request or application therefore; or
(2) as renewal of, or in substitution for, an accepted card, code, or other
means of access, whether issued by the initial insurer or a successor.
(B) Notwithstanding the provisions of subsection (1) of this section, a person may
distribute to a consumer on an unsolicited basis a card, code, or other means of access for use in
initiating an electronic fund transfer from such consumer's account, if -

(1) such card, code, or other means of access is not validated;


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(2) such distribution is accompanied by a complete disclosure, in accordance
with Section 5, of the consumer’s rights and liabilities which apply if such
card, code, or other means of access is validated,

(3) such distribution is accompanied by a clear explanation, in accordance
with regulations of the Board, that such card, code, or other means of
access is not validated and how the consumer may dispose of such code,
card, or other means of access if validation is not desired, and

(4) such card, code or other means of access is validated only in response to
request or application from the consumer, upon verification of the
‘consumer's identity,

(C) For the purpose of subsection (B) of this Section, a card, code, or other means of

access is validated when it may be used to initiate an clectronic fund transfer.

SECTION 12. Suspension of Obligations. - If a system malfunction prevents the
effectuation of an electronic fund transfer initiated by a consumer to another person, and such
other person has agreed to accept payment by such means, the consumer's obligation to the other
person shall be suspended until the malfunction is corrected and the electronic fund transfer may
be completed, unless such other person has subsequently, by written request, demanded payment

by means other than an electronic fund transfer.

SECTION 13. Compulsory Use of Electronic Fund Transfers, - No person may condition
the extension of credit to a consumer on such consumer's repayment by means of pre-authorized

electronic fund transfers; or require a consumer to establish an account for receipt of electronic


fund transfers with a particular financial institution as a condition of employment or receipt of a

government benefit

SECTION 14. Waiver of Rights. - No writing or other agreement between a consumer
and any other person may contain any provision which constitutes a waiver of any right
conferred or cause of action created by this Act, Nothing in this section prohibits, however, any
writing or other agreement which grants to a consumer a more extensive right or remedy or
greater protection than contained in this subchapter or a waiver given in settlement of a dispute

or action.

SECTION 15. Separability Clause. - If any provision or part thereof is held invalid or
unconstitutional, the remainder of the law or the provision not otherwise affected shall remain
valid and subsisting accordingly.

SECTION 16. Repealing Clause. - Any law, presidential decree or issuance, executive
order, letter of instruction, administrative order, rule, or regulation contrary to or inconsistent

With the provisions of this Act is hereby repealed, modified, or amended accordingly

SECTION 17. Effectivity Clause. - This Act shall take effect fifteen (15) days after its

publication in at least two (2) newspapers of general circulation.

Approved,

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