Republic of the Philippines
HOUSE OF REPRESENTATIVES

EIGHTEENTH CONGRESS
Second Regular Session

HOUSE BILL No. 7606

Introduced by HONORABLE WES GATCHALIAN

AN ACT
REGULATING THE DEBT COLLECTION PRACTICES OF DEBT
COLLECTORS TO PROTECT BORROWERS FROM ABUSES,
HARASSMENT, UNFAIR TREATMENT AND MISREPRESENTATIONS

EXPLANATORY NOTE

In 2019, news regarding the harassment and unfair debt collection practices
of several lending companies circulated online and caught the attention of
many Filipinos who were also suffering in the dark regarding this matter. With
this, more complaints were filed with the Securities and Exchange
Commission (SEC) and the National Privacy Commission (NPC)
Consequently, SEC released SEC Memo Circular No. 18, series of 2019
concerning the prohibition on unfair debt collection practices of financing
companies and lending companies. Meanwhile, NPC began conducting
hearings on forty-eight (48) online lending applications that allegedly shamed
borrowers (i.¢., misuse of their personal information, including disclosure of
their unpaid balances to other people) who failed to settle their obligations on

time.

During a pandemic, where financial insecurity in households is high, and
more attention and resources are given to the health sector by the
government, unscrupulous debt collection practices may soon proliferate

again. While putting this issue in the spotlight last year evidently slowed down


these practices, the most effective way to deter them, as well as provide for
redress, and adequately protect borrowers, is through legislation directly

addressing this matter.

This measure aims to eliminate, if not minimize unfair and abusive debt
collection practices conducted by debt collectors against consumer-borrowers
by providing allowable means to acquire location information of the borrower
and enumerating prohibited acts. It likewise places the debt collector and the
consumer-borrower in the same-level playing field as the measure provides
adequate legal remedies to borrowers who are victims of these scrupulous

practices.

In view of the foregoing, the passage of this bill is earnestly sought



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Republic of the Philippines
HOUSE OF REPRESENTATIVES

EIGHTEENTH CONGRESS
Second Regular Session

HOUSE BILL No. 7606

Introduced by HONORABLE WES GATCHALIAN

AN ACT
REGULATING THE DEBT COLLECTION PRACTICES OF DEBT
COLLECTORS TO PROTECT BORROWERS FROM ABUSES,
HARASSMENT, UNFAIR TREATMENT AND MISREPRESENTATIONS,

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 “Fair Debt
Collection Practices Act”.

SEC. 2. Declaration of Policy. - It is hereby declared a State policy to
prohibit and eliminate the use of abusive, deceptive and unfair debt collection
practices by debt collectors, to ensure that those debt collectors who refrain
from using abusive debt collection practices are not competitively
disadvantaged, and ultimately, to protect borrowers against abuse and

harassment in the collection of their debts.

SEC. 3. Definition of Terms. - For the purposes of this Act, the term:
(a) Debt Collector means any person who uses any instrumentality or
any business the principal purpose of which is the collection of any debts, or
who regularly collects or attempts to collect, directly or indirectly, debts owed
or due or asserted to be owed or due another. It includes any creditor who, in

the process of collecting his own debts, uses any name other than his own,


would indicate that a third person is collecting or attempting to collect such
debt. It is likewise interchangeable with a debt collection agency or a third-
party service provider engaged by a creditor for the purpose of collecting debts
owed by another.

The definition does not include:

(i) A person who is collecting or attempting to collect a debt of which
the he or she is the original creditor or owner;

(i) A business that acquires a debt or debts through the seizure of
accounts receivable under a security agreement;

(iii) A corporation that purchases a debt or debts through acquiring
or merging with a business in a transaction that includes the transfer of
accounts receivables;

(iv) A person to whom the contract that gave rise to the debt was
assigned for the purpose of financing the transaction;

(v) An officer or employee of the creditor who in the name of the
creditor, collects the debt for the creditor;

(vi) Any person or entity who acts a debt collector for another person
or entity who are related by common ownership or affiliated by corporate
control, if the person or entity collects the debt for persons or entities whom
it is related or affiliated to and its principal business is not the collection of
debts;

(vii) Any officer or employee of government, national or local, to the
extent that collecting or attempting to collect any debt is in the performance
of his official duties;

(viii) Any person while serving or attempting to serve legal process on
any other person in connection with the judicial enforcement of any debt; and

(ix) Any attorney-at-law collecting a debt as attorney on behalf of and
in the name of a client.

(b) Contact means communications by telephone, mobile phone,
facsimile, e-mail, automated call system, text messaging, or any other modes,
or in person, including messages left for a debtor with another person or by

voicemail or on an answering machine, or any other form of communication


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not specifically excluded, but does not include communications that the
debtor has expressly consented to or solicits in advance.

(c) Creditor means a person to whom a debtor owes a debt or who has
extended credit to a debtor, including, but not limited to, credit in the form of
a sale on credit, a loan of money or the provision of goods and services. It
includes a financing company and a lending company.

(4) Debt means a monetary obligation enforceable at law owed by a
debtor, including, but not limited to, a purchase on credit, accounts
receivable, a loan of money or the provision of goods or services.

(e) Debtor means an individual who has an obligation for a debt,
including, but not limited to, the owner of a sole proprietorship, a member of
a partnership or an individual who has provided a personal guarantee.

(Express Consent means consent in a verifiable form, including, but
not limited to, writing and audio recordings.

(g) Representative means a person, other than the debtor or creditor,
that is duly authorized by the debtor or creditor to contact or be contacted

and communicate with about the debt.

SEC. 4. Acquisition of Location Information. - Any debt collector
communicating with any person other than the borrower for the purpose of
acquiring location information about the borrower shall:

(1) Identify himself, state that he is confirming or correcting location
information concerning the borrower, and only if expressly requested, identify
his employer;

(2) Not state that such borrower owes any debt;

(3) Not communicate with any such person more than once unless
requested to do so by such person or unless such debt collector reasonably
believes that the earlier response of such person is erroneous or incomplete
and that such person now has a correct or complete location information;

(4) Not communicate by post card;

(5) Not use any language or symbol on any envelope or in the contents
of any communication that indicates that the debt collector is in the debt

collection business or that the communication relates to the collection of debt;


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(6) After the debt collector knows the borrower is represented by an
attorney with regard to the subject debt and has knowledge or, can readily
ascertain, such attorney’s name and address, not communicate with any
person other than the attorney, unless the attorney fails to respond within a

reasonable period of time to the communication from the debt collector.

SEC. 5. Allowable Debt Collection Practices. ~ Financing companies,
lending companies, credit card companies, creditors, debt collectors and third
party service providers engaged by creditors (collectively known as ‘Debt
Collector’) may resort to all reasonable and legally permissible means to
collect amounts due them under the loan agreement, provided that in the
exercise of their rights and performance of their duties, they must observe
good faith and reasonable conduct, and refrain from engaging in abusive,

unfair, and untoward acts enumerated in this Act.

SEC. 6. Prohibition Against Harassment or Abuse. - A debt collector
shall not engage in any conduct the natural consequence of which is to

harass, oppress, or abuse any debtor in connection with the collection of a

debt. Without limiting the general application of the foregoing and without
prejudice to the application of the pertinent provisions of the Revised Penal
Code and other laws, the following conduct shall be considered a violation of
this section:

(a) The use or threat of use of violence or other criminal means to harm
the physical person, reputation, or property of the debtor or his/her family;

(b) The use of obscene or profane language or language the natural
consequence of which is to abuse or shame the debtor or his/her family
and/or which amount to a criminal act or offense under applicable laws;

(c) The disclosure or publication or posting of the names and other
personal information of the borrowers who allegedly refuse to pay debts,
except as may be allowed in Section 10 of this Act;

(d) The advertisement for sale of any debt to coerce payment of the debt;


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(c) Causing a telephone or mobile phone to ring or engaging any person
in telephone or mobile phone conversation repeatedly or continuously with
intent to annoy, abuse or harass any person at the called number; and

( except as provided in this Act, the placement of telephone or mobile

phone calls without meaningful disclosure of the caller’s identity.

SEC. 7. False or Misleading Representations. ~ A debt collector shall not
use any false, deceptive, or misleading representation or means in connection
with the collection of any debt. Without limiting the general application of the
foregoing and without prejudice to the application of pertinent provisions of
the Revised Penal Code and other laws, the following conduct is a violation of
this section:

(1) The unauthorized use of any badge, uniform, or facsimile thereof;

(2) The false representation of the following:

(a) The character, amount or legal status of any debt; or
(b) Any services rendered or compensation which may be lawfully
received by any debt collector for the collection of the debt;

(3) The false representation or implication that any individual is an
attorney or that any communication is from any attorney;

(4) The representation or implication that non-payment of any debt will
result in arrest or imprisonment of any person or the seizure,
garnishment, attachment or sale of any property or wages of any
person unless such action is unlawful and the debt collector or
creditor intends to take such action;

(5) The use of threat to take any action that cannot be legally taken;

(6) The false representation or implication that a sale, referral or other
transfer of any interest in a debt shall cause the borrower to:

(a) Lose any claim or defense to payment of the debt; or
(b) Become subject to any practice prohibited by this Act;

(7) The false representation or implication that the borrower committed
any crime or other conduct in order to disgrace the borrower;

(8) Communication or threatening to communicate to any person credit

information which is known or which should be known to be false,


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including the failure to communicate that a disputed debt is
disputed;

(9) The use or distribution of any written communication which
stimulates or is falsely represented to be a document authorized,
issued or approved by any court, official, or agency of the
government, national or local, or which creates a false impression as
to its source, authorization or approval

(10) The use of any false representation or deceptive means to collect
or attempt to collect any debt or to obtain information concerning a
borrower;

(11) Except as otherwise provided for communication, to acquire
location information under Section 4 of this Act, the failure to
disclose clearly in all communications made to collect a debt or to
obtain information about a borrower, that the debt collector is
attempting to collect a debt and that any information obtained will
be used for that purpose;

(12) The false representation or implication that accounts have been
turned over to innocent purchasers for value;

(13) The use of any business, company, or organization name other
than that true name of the debt collector’s business, company, or
organization; and

(14) Give any person, directly or indirectly, by implication or
otherwise, any false or misleading information, including, but not
limited to, references to the police, a law firm, prison, credit history,

court proceedings or a lien or garnishment.

SEC. 8. Unfair Collection Practices. - A debt collector shall not use unfair
or unconscionable means to collect or attempt to collect any debt. The
following conduct shall be considered a violation of this Section:

(1) The collection of any amount (including any interest, fee, charge or
expense incidental to the principal obligation) unless such amount
is expressly authorized by the agreement creating the debt or
permitted by law;


(2) The acceptance by a debt collector from any person of a check or
other payment instrument postdated by more than five days unless
such person is notified in writing of the debt collector’s intent to
deposit such check or instrument not more than ten (10) nor less
than three (3) business days prior to such deposit;

(3) The solicitation by a debt collector of any postdated check or other
postdated payment instrument for the purpose of threatening or
instituting criminal prosecution;

(4) Depositing or threatening to deposit any postdated check or other
postdated instrument prior to the date on such check or instrument;

(5) Causing charges to be made to any person for communications by
concealment of the true purpose of the communication. Such
charges include, but are not limited to, collect telephone calls and
telegram fees;

(6) Taking or threatening to take any non-judicial action to effect
dispossession or disablement of property if -

(a) There is no present right to possession of the property claimed as
collateral through an enforceable security interest;

(b) There is no present right to take possession of the property; or

(c) The property is exempt by law from such dispossession or
disablement.

(7) Using any language or symbol, other than the debt collector’s
address, on any envelope when communicating with a borrower by
use of the mails or by telegram, except that a debt collector may use
his name if such name does not indicate that he is in debt collection

business.

SEC. 9. Other Prohibited Acts and Practices, - No debt collector shall
commit any of the following prohibited acts and practices:

(a) Collect or attempt to collect money for a creditor except on the belief
in good faith that the money is due and owing by the person to the creditor;

(b) Fail to provide a contact number for the debtor to call when the debt

collector uses an automated call system to contact the debtor;


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(c) Collect or attempt to collect a debt without providing the real name
of the agent or representative of the debt collector, the contact number, the
registered name and address of the debt collector;

(d) Make any arrangement with a debtor to accept a sum of money that
is less than the amount of the balance due and owing to a creditor as final
settlement without the prior express consent of the creditor;

(e) Fail to provide a written report on the status of the account of any
person with whom the debt collector transacts with;

() Make any personal call or telephone call for the purpose of collecting
or attempting to collect a debt on any day except between 8 a.m. to 9 p.m.;

(g) Directly or indirectly threaten or state an intention to proceed with
any action for which the debt collector does not have the prior express consent
of the creditor or for which there is no lawful authority;

(h) Continue to collect or attempt to collect money from, or continue to
communicate with:

(i) A person who has informed the debt collector that he or she is
not the debtor, unless the debt collector first takes all reasonable
precautions to ensure that the person is in fact the debtor, or

(ii) The debtor, when he or she has informed the debt collector by
any verifiable means, including, but not limited to, personal service,
certified mail, courier, facsimile, or e-mail, or by any other method, that
the debt is in dispute and that the debtor wishes the creditor to take
the matter to court;

(i) Contact a debtor’s spouse, relative, neighbor, friend or
acquaintance unless the contact is limited to the purpose of obtaining the
debtor’s residential address, personal telephone number or employment
telephone number;

(i) Contact the debtor’s employer for any purpose other than to confirm
the debtor’s employment status, business title and the address of the
business, in preparation for legal proceedings;

(k) Contact the debtor when he or she has notified the debt collector in

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therein the current address and telephone number of the same for the
purpose of:
(i) Making reasonable arrangements to discuss the debt with the
debt collector, and
(i) Discussing the debt with the debt collector in accordance with
the arrangements;

() Contact a debtor at his or her place of employment where the
debtor has previously requested that the debt collector not to contact the
debtor there; Provided that the debtor makes reasonable arrangements to
discuss the debt with the debt collector, and discusses the debt with the debt
collector in accordance with the arrangements;

(m) Communicate information about the debt or the existence of the
debt with any person other than the debtor, a guarantor of the debt, the
debtor's representative or the creditor of the debt, unless the debtor has
expressly consented to the same;

(n) Charge any fee to a debtor beyond the debt that is due and owing
from the debtor to the creditor;

(0) Refuse to provide sufficient information on request of the debtor to
ensure that the debtor is aware of the identity of the original and current
creditor of the debt and the details of the debt;

(p) Enter into or arrange wage or salary assignments with a debtor or
the employer of a debtor;

(@) Exceed 3 unsolicited contacts on behalf of the same creditor with a
debtor in any period of 7 consecutive days, not including contacts with a third
party to locate a debtor, mistaken contact with a third party, or contacts by
traditional mail; or

(r) Cancel or alter a payment agreement with a debtor if the debtor has
complied with the terms of the agreement and the debtor's financial
circumstances have not changed materially, unless the debtor has

misrepresented the debtor's financial circumstances.

See. 10. Prohibited Agreements. - Any agreement entered into by the
debtor and the debt collector shall be deemed void if that agreement:

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(a) Misrepresents the rights and powers of a person collecting or
attempting to collect a debt;
(b) Misrepresents the obligations or legal liabilities of a debtor; or

(c) Is misleading as to its true nature and purpose.

See. 11. Confidentiality of Information. - Creditors shall keep strictly
confidential the data on the borrower, except under the following
circumstances:

{a) Disclosure of information with the written consent of the borrower;

(b) Release, submission or exchange of customer information with other

financial institutions, credit information bureaus, lenders, their
subsidiaries and affiliates;

(c) Upon orders of a court of competent jurisdiction or any government

office or agency authorized by law;

(d) Disclosure by creditors to debt collectors, counsels and other agents

to enforce their rights against the borrower; and

(c) Disclosure to third parties, such as insurance companies, solely for

the purpose of insuring the creditor from borrower default or other

credit loss, and the borrower from fraud or unauthorized charges.

Sec. 12. Issuance of Receipts. - Every debt collector must acknowledge
the receipt of all cash transactions, payments made in person, or payments
made at the debtor's request that the debt collector collects or receives from
a debtor for distribution to the debtor's creditors by means of receipts that
must contain the following;

(a) The date the amount is collected or received;

(b) The name of the debtor;

(c) The name of the person for whom the debt collector acts on his

behalf; and

(d) The amount received from the debtor.

Sec. 13. Settlement Agreement. - If a debt collector reaches a settlement

agreement with a debtor, the debt collector must, when the amount set out

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in the settlement agreement has been paid in full, provide to the debtor a
receipt containing;

(a) The amount paid;

(b) The name of the creditor or creditors; and

(c) A statement that the amount received is in final settlement of the

debt or debts owing.

Sec. 14. Request for Accounting. - A debt collector must provide the
debtor on request, with a complete accounting of all the details of the debt
and, if such an accounting is not in the possession of the debt collector, the
agency must request that the creditor provide it. If, within 30 days after
receiving a request for an accounting of a debt collector, the creditor has not
provided a complete accounting of the debt, the debt collector must:

(a) Inform the debtor in writing that it cannot provide the accounting

and the reasons for it, and

(b) Cease all collection activity for that account and not resume

collection activity until the accounting is provided.

A debtor may request a complete accounting only once every six (6)
months, unless the debt collector fails to provide the complete accounting as

requested.

Sec. 15. Administrative Penalties. - The Securities and Exchange
Commission and the Bangko Sentral ng Pilipinas shall issue their respective
rules and regulations for the implementation of the provisions of this Act and
for the imposition of reasonable administrative penalties on different

violations thereof.

Sec. 16. Civil Liability. —

(a) Amount of Damages. - Any debt collector who violates any of the
provisions in this Act with respect to any person shall be liable to such person
in an amount equal to the sum of:

(i) Any actual damage sustained by such person as a result of the

violation;

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(ii) In the case of any action by an individual, such additional
damages as the court may allow, but not exceeding Thirty Thousand
Pesos (P30,000.00); or

(iii) In the case of a class action, such amount for each named
plaintiff as could be recovered under paragraph (a), and such amount
as the Court may allow for all other class members, without regard to a
minimum individual recovery, not to exceed the lesser of Sixty
Thousand Pesos (P60,000.00) or one (1) percent of the net worth of the
debt collector.

(b) Factors to be Considered by the Court. ~ In determining the amount
of liability in any action under paragraph (a) of this section, the court shall
consider, among other relevant factors:

(i) In any individual action under paragraph (a) (ii) of this section,
the frequency and persistence of non-compliance by the debt collector,
the nature of such non-compliance, and the extent to which such non-
compliance was intentional, or

(ii) In any class action under paragraph (a) (iii) of this section, the
frequency and persistence of non-compliance by the debt collector, the
nature of such non-compliance, the resources of the debt collector, the
number of persons adversely affected, and the extent to which the debt
collector's non-compliance was intentional.

(c) Intent. - A collector may not be held liable in any action brought
under this section if the debt collector shows by a preponderance of evidence
that the violation was not intentional and resulted from a bona fide error in
good faith.

(d) Jurisdiction. - An action to enforce any liability created by this Act
may be brought in any appropriate court using as jurisdictional basis the

amount of debt involved.
Sec. 17. Separability Clause. — If any provision of this Act is declared

invalid or unconstitutional, the provisions not affected thereby shall remain
in full force and effect.

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Sec. 18. Repealing Clause. - All laws, presidential decrees, executive
orders, presidential proclamations, rules and regulations or parts thereof
contrary to or inconsistent with this Act are hereby repealed or modified

accordingly.
Sec. 19. Effectivity. - This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or at least two (2) national papers of general

circulation.

Approved,

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