This article talks about Republic Act No. 11765, also known as “Financial Products and Services Consumer Protection Act”. This law aims to protect consumers of financial products and services.
Introduction: What is the new law?
There is a new law in the Philippines protecting consumers of financial products and services. Known as the “Financial Products and Services Consumer Protection Act”, Republic Act No. 11765 was passed in order to protect consumers of financial products and services. The law aims to ensure that appropriate mechanisms are in place to protect the interest of the consumers of financial products and services 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. The law guarantees consumers the following rights: (a) Right to equitable and fair treatment, (b) Right to disclosure and transparency of financial products and services; (c) Right to protection of consumer assets against fraud and misuse; (d) Right to data privacy and protection; and (e) Right to timely handling and redress of complaints.
Who does the new law protect?
Section 3 of Republic Act No. 11765 defines who the law seeks to protect. It defines a financial consumer as a person or entity, or their duly appointed representative, who is a purchaser, lessee, recipient, or prospective purchaser, lessee or recipient of financial products or services. Included in the definition of a financial consumer is one who is a person, whether natural or juridical, and who had or has current or prospective financial transaction with a financial service provider pertaining to financial products or services.
What financial products and services are covered?
By definition, Republic Act No. 11765 defines a financial product or service as those which are developed or marketed by a financial service provider which may include, but are not limited to, savings, deposits, credit, insurance, pre-need and health maintenance organization (HMO) products, securities, investments, payments, remittances and other similar products and services. This also includes digital financial products or services which pertain to the broad range of financial services accessed and delivered through digital channels.
The law also defines services providers as a person, natural or juridical, which provides financial products or services that are under the jurisdiction of the Bangko Sentral ng Pilipinas (BSP), Securities and Exchange Commission (SEC), Insurance Commission (IC), and the Cooperative Development Authority (CDA).
Investment advisers are also covered. The law defines them as 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 who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning investment products, and includes Trust Department/Unit of Banks or other entities; Lawyer, accountant, engineer, or teacher whose performance of such services is solely incidental to the practice of his profession; Insurance agents; investment bankers or broker dealers; publishers of any bona fide newspaper, news magazine, or business or financial publication of general and regular circulation; and other persons as the SEC may designate by rules and regulations, or appropriate order.
How does the new law protect consumers?
The law protects consumers through the so-called financial regulators, namely the Bangko Sentral ng Pilipinas (BSP), Securities and Exchange Commission (SEC), Insurance Commission (IC), and the Cooperative Development Authority (CDA), all of which are given rule-making authority (authority to formulate their own standard and rules for the application of the provisions of this Act to specific financial products or services within their jurisdiction guided by internationally accepted standards and practices), power of regulation over interest charges and fees (the reasonableness of interest charges or fees which a financial service provider may demand, collect, or receive for any service or product offered to a financial consumer), adjudicatory powers (to impose rules of procedure concerning administrative actions), market surveillance and examination (to conduct surveillance and examination, on-site or off-site, on their respective financial service providers, consistent with their respective risk-based supervision policies, to ascertain compliance with the law), market monitoring (require the submission of reports and documents), enforcement powers (to prevent collection of unreasonable interest, fees or charges, disqualify officers and directors, impose fines, suspension or other penalties, issue cease and desist orders, suspend operationso of any provider, and impose penalties for breach of violations of the law), consumer redress and complaints, and adjudication (to the extent of trasnactions or where relief sought does not exceed Ten Million Pesos (P10,000,000.00).
One of the new requirements of the law is for financial service providers to establish a single consumer assistance mechanism for free assistance to financial consumers on financial transactions concerns. The law also reiterates the prohibition from employing abusive collection or debt recovery practices, a provision found in existing laws governing lending companies.
Republic Act No. 11765 now also regulates bundling of financial products or services, including insurance policies. Bundling of products is defined as when a financial consumer is obliged by the financial service provider to purchase any product, including an insurance policy, as pre-condition for availing a financial product or service. The law requires the financial service provider to give the financial consumer the option to choose the provider of such product.
The law also expressly prohibits contractual provisions for a financial product or service which waives or otherwise deprives a financial consumer the right to sue the financial service provider, receive information, address or resolve complaints, or have their non-public client data protected.
What are the penalties for breaking the law?
Republic Act No. 11765 punishes persons who willfully violate the law, orders or regulations issued by the financial regulators, 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 pesos (P50,000.00) but not more than Two million pesos (P2,000,000.00), or both, at the discretion of the court. If the violation is committed by a corporation or a juridical entity, the directors, officers, employees, or other officers directly made liable. This penal clause is in addition to enforcement actions which the consumers may file with the respective financial regulators. Where investment fraud is involved, in addition to criminal liability, such persons shall be administratively liable for a fine of no less than Fifty thousand pesos (P50,000.00) nor more than Ten million pesos (P10,000,000.00) for each instance of investment fraud plus not more than Ten thousand pesos (P10,000.00) for each day of continuing violation, in addition to the other administrative sanction under Republic Act No. 8799.
The purpose of the law, its scope and application are commendable. Being a new law, it still requires implementing regulations from the financial regulators, namely the Bangko Sentral ng Pilipinas (BSP), Securities and Exchange Commission (SEC), Insurance Commission (IC), and the Cooperative Development Authority (CDA). Each government agency must issue their respective implementing rules, to govern financial product and service providers. We can only hope that this law will be implemented in a manner that makes it effective and efficient by these financial regulators.
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