The Philippine government again put Metro Manila and nearby provinces under the enhanced community quarantine (ECQ). Curfew hours are imposed and only business establishments providing essential goods and services are open.
The lockdowns and business closures resulted in a “no work no pay” situation among workers who cannot work from home. Despite this, no one is blind to the fact that our physiological need for food continues.
In the absence of income during the ECQ, people will tend to borrow money from others, including banks and lending companies, or use their credit cards, in the hope that next month’s situation will be different.
We often receive random text messages or see advertisements on social media offering loans with fast processing and approval time and no collateral, but probably a high interest rate. These offers are tempting especially during these difficult times.
However, we often hear tales of those who borrowed from these lenders ending up being shamed through social media, with their family, friends or employers being threatened to pressure them to pay.
To address this, the Securities and Exchange Commission (SEC) issued Memorandum Circular (MC) 18-2019 prohibiting the unfair debt collection practices of financial and lending companies.
According to the SEC, the use of threats, including action that cannot be legally taken, or violence to harm the borrower, his reputation or property, or use of obscenities, insult or profane languages to abuse the borrower, disclosure of names and other personal information of the debtors, as well as his loan information constitutes unfair debt collection practices.
Making contact before 6 a.m. or after 10 p.m. is also considered as unfair practice unless there is prior consent from the borrower.
It is common practice for banks and lending companies to outsource the collection of accounts to a third-party service provider.
However, under the said SEC Circular, such collectors are still bound to observe fair collection practices.
Thus, banks and lending companies who engage collectors should adopt policies and procedures in handling the collection of debts even if the same are outsourced to third-party collectors.
Violation of MC 18-2019 exposes the concerned lending or financing companies to fines in amounts ranging from P25,000 to P50,000 for the first offense, P50,000 to P100,000 for the second offense, and for the third offense, a fine of twice the amount of the fine imposed for the second offense but not exceeding P1,000,000, or suspension of lending and financing activities for a period of 60 days, or revocation of its Certificate of Authority.
The said penalties are without prejudice to the other penalties that may be imposed by the SEC. Unfair debt collection practices such as disclosure of personal and loan information of the borrower may also constitute violation of the Data Privacy Law which may be prosecuted separately.
Lending and financial institutions, including the third-party service providers, are encouraged to observe best practices in debt collection. They are not left without any remedy to collect from their borrowers. Unfair practices that may harm the person or ruin the reputation of the borrower should be dissuaded.