The Securities and Exchange Commission (SEC) has fined HC Consumer Finance Philippines, Inc. for unfair debt collection practices, warning lenders that collection efforts must not violate borrowers’ privacy and rights.

Citing an order dated 3 June, the SEC said Wednesday its Financing and Lending Companies Department found HC Consumer Finance liable for violating SEC Memorandum Circular (MC) No. 18, Series of 2019, which prohibits unfair debt collection practices, and MC No. 5, Series of 2023, which implements the Financial Products and Services Consumer Protection Act of 2022.

The SEC imposed a P50,000 fine for the company’s first offense and ordered it to stop collecting debts from individuals who are neither guarantors nor co-makers, as well as cease using third-party residences as collection venues. 

HC Consumer Finance was also directed to review its collection policies and submit a compliance report.

“The use of a third-party residence as a collection venue necessarily creates a substantial risk that the existence of the debt, the borrower’s financial condition, or the fact of delinquency will become known to persons who have no lawful interest in the transaction. Such exposure is precisely what the FCPA, MC 18, and MC 5 seek to prevent,” the SEC said.

“The totality of the evidence on record establishes that [HC Consumer Finance], under the pretext of enforcing a valid obligation, transgressed the clear and non-waivable boundaries imposed by law on the manner of debt collection,” it added.

The case arose from a complaint that the lender conducted collection activities at a residence occupied by individuals who were not guarantors or co-makers and continued doing so despite the borrower’s written objection.

Under MC 18, contacting individuals who are not a borrower’s guarantors or co-makers constitutes an unfair debt collection practice, while MC 5 classifies it as an abusive debt recovery practice.