Republic Act (RA) No. 11765 or the “Financial Products and Services Consumer Protection Act”
An Act affording more protection to consumers of financial products and services to promote transparency, fair and sound market conduct, reasonable, and effective handling of financial consumer disputes
On May 6, 2022, Republic Act (RA) No. 11765, also known as Financial Products and Services Consumer Protection Act, was signed by President Rodrigo Duterte providing more protection for consumers in financial products and services.
This Act also aims the State to implement measures or policies to protect the following rights of the 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; and
- Right to timely handling and redress of complaints.
To enable this, RA 11765 provides the duties and responsibilities of the financial service providers as follows:
- Board and senior management oversight – ensure conformity of this RA and provide the means by which they identify, measure, monitor, control, and manage consumer protection risk;
- Appropriate product design and delivery – responsible for continuously evaluating the financial products or services to fully understand the needs of their clients and the capacity of the markets. It includes:
- Affordability and sustainability assessment – determining whether the particular financial product or service is suitable and affordable to their clients.
- Cooling-off period – allowing the clients to consider the costs and risk of financial product or service.
- Pre-payment of loans and other credit accommodations – a borrower may prepay a loan or other credit transactions in whole or in part at any time prior to the agreed maturity date.
- Transparency, disclosure, and responsible pricing – ability to communicate all information concerning the financial product or service concisely to financial consumers. Disclosure is provided before the contracting to give the client a time for review. Pricing of the products is taken into consideration by following the internal policies and procedures in setting prices;
- Fair respectful treatment of clients – has the right to select clients without discriminating against them;
- Privacy and protection of client data – respectful toward their client’s privacy;
- Financial consumer protection assistance – handling the complaints, inquiries and request of financial consumers related to financial transactions; and
- Information security standards – ensures the safety and protection of the confidentiality, integrity, availability, authenticity, and non-repudiation of the client’s information by adopting and implementing security standards.
On the other hand, the financial regulators, which refers to the Bangko Sentral ng Pilipinas (BSP), Securities and Exchange Commission (SEC), Insurance Commission (IC) and the Cooperative Development Authority (CDA) shall exercise the following powers to ensure that the financial providers comply with the provisions of RA 11765:
- Rulemaking – enables financial regulators to formulate their own standards and rules;
- Market conduct surveillance and examination – includes on-site and off-site surveillance;
- Market monitoring – authority to require service providers to submit reports or documents, as needed;
- Enforcement – actions that the regulators may impose on service providers include:
- Restriction in collecting unreasonable interest, fees, and other charges;
- Disqualification and/or suspension of directors, trustees, officers, or employees for violations;
- Imposition of fines, suspension, or penalties;
- Imposition of cease and desist orders without the necessity of a prior hearing. However, the service provider is given the opportunity to appear in a summary hearing within five (5) calendar days from the receipt of the order. If no hearing is requested, the order shall be final;
- Suspension of operations; and
- In addition to imposition of penalties, the regulators may enter an order requiring accounting and disgorgement of profits obtained, or losses avoided, including reasonable interest.
- Consumer redress or complaints handling mechanism;
- Adjudication – The BSP and SEC shall have the authority to adjudicate financial consumers (solely for payment of reimbursement) not exceeding the amount of ten million pesos (P10,000,000.00); and
- Other powers – may exercise other powers provided by their enabling laws or charters which are necessary or incidental to the carrying out of the express powers to achieve the law’s objectives and purposes.
Penalties, administrative sanctions, and other provisions:
Anyone who violates this RA will be punished by imprisonment of not less than one (1) year, but not more than 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.
Administrative sanctions are applicable to a financial service provider, its directors, trustees, officers, employees, or agents in addition to the enforcement actions and criminal sanctions stated in the Act.
Persons found guilty of investment fraud may face a fine of not less than Fifty Thousand Pesos (P50,000.00) but not more than Ten Million Pesos (P10,000,000.00), plus a fine of not more than Ten Thousand Pesos (P10,000.00) for each day the violation continues.
Furthermore, if a profit is gained or a loss is avoided as a result of a violation of this Act, the financial regulator may impose a fine not exceeding three (3) times the profit gained or loss avoided. The financial regulator may suspend or cancel the financial service provider’s authority to operate in relation to a particular financial product or service.
Prescription of all actions or claims is after five (5) years from the completion of the financial consumer transaction or the discovery of deceit or nondisclosure of material facts. Moreover, a commission of the violation shall in any event prescribed after ten (10) years. The Insurance Code’s prescription period for the commencement of action applies to insurance contracts.
This RA will take effect fifteen (15) days after its publication (May 06, 2022).
For everyone’s guidance and perusal.
DISCLAIMER: The advisory is not a substitute for an expert opinion and is purely a general research that may have not considered the entirety of other related topics. Any tax and/or compliance advice is not intended or written by the author to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on by the regulatory bodies, or (ii) promoting, marketing, or recommending to another party any matters addressed herein.
The opinion or advice expressed in this advisory is based on the facts and circumstances gathered. Any inaccuracy in any of the assumptions set forth above may have the effect of changing all or part of this report, and this report may not apply. The advice is based on our interpretation of the provisions of the Code, the Revenue Regulations promulgated and issued by the tax bureau, BIR positions as set forth in published Revenue Rulings, other pronouncement, orders and circulars, and judicial decisions in effect on the date of this report, any of which could be changed at any time. Any such changes may be retroactive and could significantly modify the statements and opinions/ advice expressed herein In effect, this might render the advisory obsolete or incorrect in partial or in full. We undertake no obligation to advise you of changes that may hereafter be brought to our attention.
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