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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

18th Congress
First Regular Session

House Bill No. 6299
Introduced by Hon. Ferdinand L. Hemandez.

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

Financial products and services, such as insurance, loans, and securities are being
aggressively sold in the market. While they offer financial security, such promise is often
used as a pretext to take advantage of unwitting consumers, who lose thousands of pesos to
fraudulent or overpriced financial products and services.

While the Insurance Code, General Banking Law, The Truth in Lending Act, and the
Securities Regulation Code regulate transactions involving financial products and services,
there are gaps within and between these laws which are being exploited by financial service
providers, such as the inadequacy of transparency mechanisms and price controls. As we hold
financial service providers to the utmost fiduciary liability, it is but necessary to fill in these
gaps in our laws to be able to protect financial consumers.

This bill aims to vest the Bangko Sentral ng Pilipinas, the Insurance Commission, and
the Securities and Exchange Commission, as well as the Cooperative Development Authority
with respect to cooperatives which offer financial services, rule-making, surveillance and
inspection, market monitoring, enforcement, and adjudication powers over the financial
service providers which they supervise. Furthermore, it provides for additional duties for
financial service providers, such as ensuring transparency, reasonable pricing, non-
discrimination based on unreasonable criteria, and privacy protection.

In view of the foregoing, the approval of this measure is earnestly sough()



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

18” Congress
First Regular Session

6299

House Bill No.

fac Ton. Ferdi Bs

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:

Section 1. _ Short Title — This Act shall be known as the “Financial Consumer
Protection Act of 2019”.

Section 2. Declaration of Policy — \t 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 fai
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:

Right to equitable and fair treatment;

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.

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

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.



c) “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.

4) “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 (CDA).

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

©) “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:

1. Restriction on the ability of the supervised Financial Service Provider to
continue to collect fees or charges in cases of excessive fees or charges
imposed by the Financial Service Provider, except interest rates which
shall be governed by the Usury Law;

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

3. Imposition of fines, suspension, or penalties for any non-compliance
with or breach of this Act, its implementing regulations, or orders of the
Financial Service Providers;

4, Issuance of a cease and desist order to the Financial Service Provider
without the necessity of a prior hearing if in the Financial Regulator’s


judgment, the act or practice, unless restrained, amounts to fraud or a
violation the provisions of this Act and its IRR or may unjustly cause
grave or irreparable injury or prejudice to Financial Consumers.

‘The Financial Service Provider shall be afforded an opportunity to
defend its act or practice in a summary hearing before the Financial
Regulator or its designated body, upon request made by the Financial
Service Provider within five (5) calendar days from its receipt of the
order. If no such hearing is requested within said period, the order shall
be final. If a hearing is requested by the Financial Service Provider, the
proceedings shall be conducted summarily without adhering to the
technical rules of evidence, and all issues shall be determined primarily
on the basis of records, after which the Financial Regulator may either
reconsider or make final its order;

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

E, Adjudication - Financial Regulators shall have the authority to 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.

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
both direct and indirect, in accordance with the pertinent provi
penalties prescribed by the Rules of Court.



F. 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.

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

Investment Adviser shall mean any person who, for compen: 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 who, for compensation and as part of a regular business, issues or
promulgates analyses or reports concerning investment products; but does not include 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;

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

€) 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 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.

D. 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.

E. 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.

F. 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 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 Insurance 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 (PS0,000.00) 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
rules, 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.

Section 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.

Section 19. Effectivity clause — This Act shall take effect fifteen (15) days after its

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

Approved.

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