QuestionsQuestions (Republic Act No. 11765)
RA 11765 is titled the “Financial Products and Services Consumer Protection Act.” Its policy is to ensure mechanisms for transparency, fair and sound market conduct, and fair, reasonable, and effective handling of financial consumer disputes—reinforcing consumer confidence and stability of the Philippine financial system.
A financial consumer is a person or entity (or their duly appointed representative) who is a purchaser, lessee, recipient, or prospective purchaser/lessee/recipient of financial products or services; and any person who had or has current or prospective financial transactions with a financial service provider.
It refers to financial products/services developed or marketed by a financial service provider, including savings, deposits, credit, insurance, pre-need, HMO, securities, investments, payments, remittances, and similar products/services. It also includes digital financial products/services accessed and delivered through digital channels.
The financial regulators are BSP, SEC, IC, and CDA. BSP, SEC, and IC enforce the Act on service providers under their jurisdiction; CDA is an implementing government agency only for cooperatives offering specific financial products/services (e.g., savings and credit), while insurance cooperatives remain under IC and cooperative banks/BSP-supervised cooperative institutions under BSP.
Regulators may formulate standard rules for applying the Act to specific financial products/services within their jurisdiction, guided by global best practices. They may also determine reasonableness of interest charges or fees and issue rules of procedure for administrative actions related to the Act.
Regulators may restrict collection of excessive/unreasonable interests/fees; disqualify/suspend responsible persons; impose fines/penalties; issue cease-and-desist orders without prior hearing when the act amounts to fraud or a violation that may cause grave or irreparable injury, with a right to request a summary hearing within five calendar days.
Financial regulators must provide efficient/effective redress mechanisms like mediation, conciliation, or other ADR modes. The financial consumer may avail of the mechanism prior to adjudication.
BSP and SEC may adjudicate civil actions arising from financial transactions that are purely civil in nature where the claim solely for payment/reimbursement does not exceed Php 10,000,000. Their decisions are final and executory; court intervention is limited to a petition for certiorari on grave abuse of discretion or lack/excess of jurisdiction, filed within 10 days.
Investment fraud is deceptive solicitation of investments from the public, including Ponzi schemes, boiling room operations, and offering/selling investment schemes to the public without SEC license/permit (unless exempt under existing laws). It also includes schemes where promised profits/returns are sourced from investors’ own contributions.
They must ensure consumer protection risk management via board and senior management oversight; continuously evaluate products/services to suit clients’ needs, understanding, and capacity; adopt suitability and affordability assessments (including preventing over-indebtedness for credit); provide a cooling-off policy when required; and comply with transparency/disclosure and responsible pricing.
When prescribed (or when necessary for a particular regulated product), the consumer may cancel/return the contract without penalty during the cooling-off period. However, recovery of processing costs may be allowed if approved by regulators, and the right cannot be exercised after a claim is made for insurance, pre-need, or HMO contracts.
They must use clear and concise language; provide updated and accurate information on pricing/costs; give sufficient product disclosure before contracting; inform clients of changes in terms/conditions; disclose consumer assistance unit contact information and the relevant regulator in advertising; and make regulatory/disclosure information available through public channels.
Financial service providers may select clients but may not discriminate based on race, age, financial capacity, ethnicity, origin, gender, disability, health condition, sexual orientation, religious or political affiliation (risk-based distinction for a specific product may be allowed). They are also prohibited from employing abusive collection or debt recovery practices.
Financial service providers must respect privacy and protect client data consistent with RA 10173 (Data Privacy Act of 2012). Regulators issue regulations in coordination with the National Privacy Commission governing disclosure of client data to third parties. Consumers have rights to review data, correct inaccurate data, refuse sharing, and request removal if they no longer wish to use services.
Under Section 9 (Bundling of Products), if required to purchase a product (including insurance) as a pre-condition, the consumer may choose the provider of such product subject to reasonable standards set by the financial service provider, and this information must be made available to the consumer.
The financial service provider is responsible for acts/omissions of its directors, trustees, officers, employees, or agents in marketing and transacting. It is solidarily liable with accredited third-party service providers for their acts/omissions in marketing and transacting, including debt collection.
Actions/claims prescribe after five (5) years from the time the transaction was consummated, or five (5) years from discovery of deceit or nondisclosure of material facts. In any event, they prescribe after ten (10) years from the commission of the violation. For insurance contracts, the prescriptive period under the Insurance Code applies.
For willful violations: imprisonment of not less than 1 year but not more than 5 years, or fine of not less than Php 50,000 but not more than Php 2,000,000, or both; corporate officers/employees directly responsible may be held liable. For investment fraud: criminal penalties under RA 8799 (Sec. 73) and administrative sanctions under RA 11765 (Sec. 16), including fines per instance up to Php 10,000,000 and additional daily fines for continuing violation, plus possible suspension/cancellation of authority to operate for a particular product/service.